News Room - Steel Industry

Posted on 22 May 2009

China May Demand Bigger Price Cut Than Japanese Mills

China, the world’s largest consumer of iron ore, may demand a bigger price cut than the 30 percent to 35 percent price reduction that Japanese mills are requesting.

 

Chinese steelmakers had previously said they wanted a price cut of between 40 percent and 50 percent from iron ore producers including Rio Tinto Group and Cia Vale do Rio Doce, the world’s two biggest suppliers of the steelmaking ingredient.

 

“We won’t change our request,” Luo Bingsheng, vice chairman of the China Iron & Steel Association, said today in an interview in Beijing, without specifying details.

 

Japan’s Nippon Steel Corp. may be close to agreeing a 30 to 35 percent cut in iron ore contract prices with producers including Rio, two people familiar with the talks said this week. Chinese steelmakers posted a combined loss of 1.5 billion yuan ($220 million) in April and need a larger price cut to revive profits.

 

Chinese steelmakers “can choose” to buy more iron ore on the spot market should contract agreements with producers not be reached, Luo said. That “will be a decision to be made by the steelmakers,” and not one decided by the association, he said.

 

Almost 40 percent of China’s 72 biggest steelmakers suffered losses last month, the Ministry of Industry and Information Technology said in a report posted today on its Web site. The steelmakers had a combined loss of 5.2 billion yuan in the first four months, it said.

 

Rio de Janeiro-based Vale, the world’s largest supplier of iron ore, was in Tokyo for talks with mills this week, a person familiar with the talks said. London-based Rio Tinto is the second-largest exporter of the material.

 

Typically, global steelmakers and iron ore producers will follow prices set in the first agreement announced. Last year, Rio Tinto and BHP Billiton Ltd. broke with tradition by agreeing to different prices with steelmakers, ignoring an earlier settlement first announced by Vale.