The Ministry of Industry and Information Technology said Wednesday it backs united iron ore talks led by the China Iron & Steel Association (CISA) and the China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters.
MIIT spokesman Zhu Hongren told a press conference the ministry backs the ongoing talks and will support relevant departments in finalizing an iron ore import recording system and reviewing the location of imported iron ore to curb price hikes caused by disorderly competition.
Zhu said that China hopes the three major iron ore miners, Rio, BHP and Vale, can reach a fair and equitable price with the world's largest steel producer and iron ore importer, bearing in mind long-term interests of the industry and friendly long term cooperation with China.
Chinese steel mills negotiate with the miners every year on iron ore prices. The talks for last year and 2010 reached an impasse in June because the two sides couldn't agree on a further 12 percent discount beyond that accepted by Japanese and South Korean steel mills.
Insiders and analysts are not optimistic on the 2010/2011 iron ore talks due to China's rising demand and climbing spot prices.
China imported 630 million tons of iron ore last year, a 41.6 percent year-on-year increase, at an average price of $79.90 per ton. It produced 568 million tons of crude steel in 2009, compared with 500 million tons in 2008.
Umetal steel analyst Du Wei predicted a 10 percent increase in the country's crude steel output, adding iron ore talks will go against China in the next few years in view of China's climbing steel output.
Iron ore spot prices rose to $100 per ton at the end of December, and to more than $130 earlier this month.
A source close to the matter told the Global Times that it is possible China will follow Japan and Korea, as it did last year, although the Chinese negotiation team has been trying to facilitate negotiations by working with Japan, Korea and Brazil, though the results haven't been as good as expected. The source is expecting a 10-15 percent price hike.
Du agreed. When Japan and other countries finish talks, China may follow if the price is not far from its psychological price point, he said.
Goldman Sachs raised its forecasts for the 2010/2011 iron ore contract price to nearly 35 percent, up from an earlier projection of 20 percent increase. Macquaire Securities Group predicted December 15 that the three miners might ask for a 30 percent increase in contract prices this year.
The government is trimming outdated overcapacity and encouraging development of domestic iron ore miners and looking for more import sources overseas to reduce dependence on the three miners.
The source said the MIIT has submitted to the National Development and Reform Committee and the State Council guidance on mergers and acquisition in the steel industry to cultivate three to five globally competitive steel mills.
Source: Global Times
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