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China still insisted on stability of
iron ore prices in 2006, after the latest round of exclusive talks
on a long-term contract failed to yield any progress.
China’s largest steel maker Shanghai
Baosteel Group Corp failed recently to reach an agreement in 2006
iron ore prices with major overseas miners, such as Australia's BHP
Billiton Ltd, Rio Tinto Group and Brazil's Companhia Vale do Rio
Doce, according to an unnamed source close to the subject.
The negotiation broke down due to the
two sides insisting on vast differences in prices.
"Miners insisted on raising prices
further while we insisted on cutting (prices) ... We didn't get any
chance to (go over) detailed figures because both parties are
expecting opposite price directions," a Baosteel official said.
The Chinese side said since domestic
steel manufacturers are in oversupply and overseas suppliers are so
diversified, a price increase for iron ore is not justified.
This year, Baosteel is the only
representative of Chinese enterprises in talks with miners. The
prices Baosteel agrees upon will be accepted by all domestic mills
and iron ore traders.
The China Iron & Steel Industry
Association said all the other steel makers and iron ore trading
companies have been banned from holding individual iron ore price
negotiations for 2006 term contracts with international miners.
It said Chinese mills and trading firms
must follow related regulations, without talking with the three iron
ore miners or signing long-term agreements with miners for cash
prices.
The association predicted that the
country's crude steel production growth would slow to 10 per cent
this year, compared with the 24.56 per cent in last year.
Meanwhile, China is also developing new
sources of iron ore imports.
China's iron ore import from India
increased by over 36 percent last year over 2004. The spot price for
iron ore also declined late last year to US$66 per ton from US$83
last April, statistics from the association said.
Long-term iron ore prices between major
suppliers and buyers are generally settled before April, when
delivery begins.
Global miner BHP Billiton Ltd was
quoted by Reuters as predicting negotiations could be extended
beyond April.
"The contract year has at least another
month to run ... sometimes it is settled before Christmas and
sometimes it's not settled until after the contract year," said
Graeme Hunt, president of BHP Billiton's iron ore division.
If an agreement cannot be reached till
April 1, the two sides could trade iron ore at last year's price for
another six months before they reach a final agreement.
However, the on-the-rocks negotiation
has already caused a price rise in steel products at home.
Baosteel has raised its key steel
products by about 10 percent for the second quarter this year from
this quarter, according to the company's salespeople.
The prices for hot-rolled and
cold-rolled steel products may see a rise between 150 to 700 yuan
(US$18.5-86.4) per ton.
In fact, China is showing an increasing
role in the long-term price negotiations this year.
Japan's Nippon Steel, a major iron ore
buyer that used to play a major role in negotiation, has not yet
reached 2006 agreement with suppliers, awaiting China's outcome.
Experts predict that China's say in
negotiation is likely to keep this year's price increase small.
Last year, Chinese mills and iron ore
traders accepted a 71.5 percent rise in iron ore prices, which was
set by Japanese companies.
Figures from the customs show that in
2005, China imported iron ore of 275 million tons, up 32.3 percent
year-on-year and accounting for 43 percent of the world's total ore
shipment. | 
