China is expected to demand a bigger cut in prices of iron ore from BHP Billiton and Rio Tinto Group than from Brazil’s Cia. Vale do Rio Doce after shipping costs plunged, the nation’s steel association said.
BHP and Rio successfully held out for increases of almost 100 percent for their iron ore last year, while Vale won a 71 percent increase as the Australian miners pointed out that it was cheaper to ship the material to China from Australia than from Brazil. However, shipping costs have plummeted in the last six months with the differential between shipping from Australia and Brazil to China falling from $55 a ton to just $13 a ton.
“There’s no equalization if Australian and Brazilian ores get the same cuts,” Shan Shanghua, secretary general of the China Iron and Steel Association, said in an interview from Beijing late yesterday. “That’s unacceptable.”
Du Wei, head of iron ore research at Umetal Research Center said: “There’s speculation China wants the prices to move back to 2007 levels, which means BHP and Rio should give up the freight compensation they enjoyed last year. It’s reasonable as the freight difference has been narrowed.”
Chinese steelmakers paid as much as $127 a ton for benchmark iron ore lumps from Australia.
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