Chinese steel executives hotly rejected talk on Thursday that their Japanese counterparts were negotiating for a 30-35 percent price cut in annual iron ore talks, while China seemed no closer to building consensus around its own hopes for an even bigger price cut.
The benchmark iron ore price is set in often bitter talks between Chinese market leader Baosteel and the world's top iron ore miners -- Brazil's Vale, Anglo-Australian rivals Rio Tinto and BHP Billiton.
Parallel talks with Japanese and South Korean steelmakers spice up the negotiations, since the trio, who control around 75 percent of the 800 million tonne total annual seaborne iron ore trade, can try to drive a wedge between Asian rivals.
One source familiar with the Japanese price talks said Nippon Steel Corp and iron ore miners discussed a 30-35 percent price cut and a deal was likely this week or the next, otherwise it would be delayed until the end of June.
But Shan Shanghua, secretary-general of the China Iron & Steel Association, ruled out any such deal. "Japanese and Korean steelmakers shouldn't be able to accept a 30-35 percent cut because that would certainly force steel mills to make losses," he was quoted as saying by China's Xinhua news agency.
With steel demand tumbling, steelmakers are demanding a price cut of between 40 and 60 percent, but the three miners, who had achieved a near doubled price hike last year on the back of booming demand, fight for a much smaller cut.
"CISA will soon make a statement calling for a 45 percent price cut from Rio Tinto and a 40 percent price reduction from Vale," Xinhua quoted Shan as saying, citing an article in the China Securities Journal.
A source directly involved in the deal declined to comment and a spokesman for Rio Tinto said: "The negotiations are continuing and we can't comment any further."
A senior manager at a Beijing-based, state-owned trading house agreed. "Chinese steel mills will not follow a 30-35 percent cut on the iron ore benchmark prices," he said. "It is not about earning more or less, it is about live or die.
"Currently, spot prices of Australian iron ore have fallen to the $65 per tonne level, about a 40 percent price fall. But even so, steel mills here are feeling the pressure as they can not see any profit due to the sluggish steel market.
"Mills will fulfil their spot contracts and ignore the more expensive long-term benchmark. I understand that Japanese and Korean steelmakers are eager to settle on new benchmark as they source all their ores on it."
The source familiar with the Japanese talks said Japanese firms were in close contact with their Chinese counterparts, who wanted to clinch a deal before their June 30 deadline.
There was no strong reason for the Japanese to strike a deal soon, since their deadline is Sept 30, the source said, but they wanted to decide steel prices and fix their budgets.
The same source said Japanese firms were wary of repeating last year's mistake, when Nippon and Vale struck a deal first, but Baosteel agreed a different price.
Industry sources and analysts said a deal might come as late as the third or last quarter, as miners could hold out as long as possible, hoping to see a big surge in Chinese demand as stimulus money kicks in.
Chinese steelmaking exuberance has drawn record imports of iron ore into the country for three months running, despite huge stockpiles at ports. The shipments are sought after because they are cheaper than much of China's high-cost production.
Source: The Guardian
No comments:
Post a Comment