Chinese steel companies to forge united front on ore prices for 2009
28/10/2008 16:03
China Iron and Steel Association has called a conference of the largest
domestic steelmakers to work out a common stand in bargaining with major iron
ore producers in the 2009 round of price negotiations starting next month, the
English newspaper China Daily reported today.
This round of negotiations is
expected to be different from previous ones that were largely dominated by the
ore suppliers. This time, the market situation has changed as fallout from the
global credit crisis has greatly depressed demand, the daily said.
The
enhanced bargaining power of Chinese steelmakers in this buyers' market was
clearly demonstrated by their boycott of Brazil's mining company, Companhia Vale
do Rio Doce, which unilaterally raised ore prices on Sept. 3.
Major Chinese
steel makers and iron ore suppliers decided to suspend imports from Vale because
of the company's price hike on iron ore.
Shrinking steel demand, plus a
sagging property market and dropping car sales, has pushed the prices of Chinese
steel products down by an aggregate of 40 to 50 percent since early
October.
"The only way out for steel producers at the moment is to slash
production to fight the drop in steel product prices," said Li Bing, director of
the mining resources trading department at Ma Steel in Hebei Province. He added
Ma Steel has cut its production by 30 percent this month.
Despite dwindling
demand for steel products, many Chinese steelmakers, in compliance with
previously agreed trading contracts with ore suppliers, are continuing to import
iron ore from Australian suppliers at the contract price, which is much higher
than the current spot prices.
Baosteel, the country's top steel producer,
last week announced a further drop in the prices of its major products from
1,700 to 1,000 yuan (US$146 to US$249) per ton.
"Falling spot iron ore prices
and the output reduction by Chinese steelmakers will combine to strengthen their
bargaining power in the negotiations," said Du Wei, a senior steel industry
analyst with the Chinese Umetal.com website.
Xinhua
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