Thursday, March 4, 2010

Iron Ore Miners "Asking For 50 Per Cent Rise"

China Daily reports that the big three iron ore miners - Vale, Rio Tinto and BHP Billiton - are seeking a 50 percent hike in term prices. The paper cited an executive who heads the iron ore department of a large State-owned steel mill source for its report.

According to the report Rio Tinto has asked for a 50 percent rise over the 2009 benchmark price, BHP wants the ore it supplies to some steel mills to be priced at spot rates, while Vale is keen on a flat 50 percent increase based on the difference between the spot price and the 2009 benchmark price, said an executive who heads the iron ore department of a large State-owned steel mill.

"Baosteel, which is leading this year's ore talks, would wait and see how Japanese and South Korean steel mills react to the proposal before taking a decision in this regard as they do not want to be blamed subsequently for the steep rates," said the paper’s source.

Should the steelmakers accept the price rises it will put further on their already sagging bottom lines. Official data shows that the average profit ratio of Chinese steel mills declined to 2.2 percent in 2009, down 53.4 percent from the previous year.

The managing director of one Jiangxi-based steel company said "Our company will feel the heat if this year's contract prices go up by 50 percent. We will be forced to increase delivery prices of steel products to offset the high raw material costs." He added "It is not clear whether the market would digest the product price hikes as steel stocks are still high."

Steel stocks in 26 major Chinese cities stood at 15.86 million tons on Feb 22, up 51 percent from a year ago, according to data from Mysteel.com.

No comments: