A “prolonged stand-off” may occur in this year’s iron-ore contract price talks between Chinese steelmakers and international producers, Fitch Ratings said.
Chinese steelmakers are maintaining demands for price reductions as much as 45 percent lower than last year, and their large stockpiles of the steelmaking raw material give them a bargaining advantage, Su Aik Lim, director of the rating agency’s Asia Pacific team, said today on a conference call.
Vale SA and Rio Tinto Plc, the world’s biggest iron-ore producers, reached accords in recent weeks with Japanese and Korean steelmakers on 2009 contracts at prices 28 percent and 33 percent below those of last year. China’s Steelmakers Institute CISA has rejected a deal at these levels, which would cause higher-cost Chinese mills to lose money, Su said.
“We could be in for a prolonged stand-off,” Joe Bormann, managing director in Fitch’s Latin American Corporate team, said on the call. “Vale won’t want to undercut the competitiveness of the Asian steelmakers they’ve already settled with.”
Vale has a “strong incentive” to continue to sell to China on the spot market, Bormann said.
Source: Bloomberg
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