Baoshan Steel Seeks 'New Way' in Iron Ore Price Talks (Update1)

May 5 (Bloomberg) -- Baoshan Iron & Steel Co., China's biggest publicly listed steelmaker, is seeking a "new way" into iron ore price talks after suppliers pressed buyers to abandon annual contracts for shorter-term sales.

The steelmaker, whose parent is representing Chinese mills in price talks, is studying the impact on its long-term earnings should annual pricing be abandoned, General Manager Ma Guoqiang said in an online investors conference today. He didn't elaborate on what he meant by a "new way."

China's iron ore price talks are deadlocked for a second year after Vale SA and BHP Billiton Ltd. scrapped a four-decade system of setting annual prices for quarterly contracts. The world's three largest producers have threatened to cut supplies unless mills accept price increases of between 90 percent and 100 percent, the China Iron and Steel Association said April 28.

"We are a firm supporter of long-term ore contracts," Ma said. "We will speed our decision making in response to the change to quarterly pricing."

A doubling in prices from last year would raise the costs of making a ton of melted iron by 600 yuan ($88), Ma said. Baoshan Steel is buying iron ore at provisional prices before an official agreement, he said, without giving details.

Some Chinese steelmakers have agreed to quarterly contracts on a temporary basis, the nation's steel association said.

The Chinese government last month moved to cool its real estate market after prices surged and the fastest economic growth in almost three years stoked concerns of an asset bubble. Iron ore import prices, which traded at a 21-month high, may drop 30 percent in coming weeks, UBS AG said April 21.

Import prices of 63.5 percent-content iron ore at Chinese ports fell 1.9 percent to $186 a ton, from a record $189.50, in the week ended April 30, the first decline in eight weeks, according to Metal Bulletin.

Baoshan will seek to invest in mines and cut transport spending to lower raw material costs, Ma said. The company will "be prudent" in making investment decisions as prices are at a peak, he said.