Chinese steel mills are holding out for a steeper cut in iron ore prices than the 10% offered at the end of January by the Brazilian miner, Vale. Reports from China suggest that Vale is willing to go ahead immediately with the price cut if the Chinese side agree but the Chinese are reticent about taking the offer as it does not go far enough. The other two miners, BHP and Rio, have yet to make any price offer.
The Chinese mills are being led by the Chinese Iron And Steel Association and Baosteel, the country's biggest steel producer and are holding out for a cut of 30-50%.
There was speculation in China on Thursday that Vale may reach a price agreement with Japanese and European steel makers first, effectively setting a benchmark for the Chinese.
but with demand still soft the mills are using poor market conditions to hold out for larger price cuts.
"It won't be quick," Zou said, without offering an estimate of how long talks might drag on.
It is unlikely that the Chinese will accept a "shipping premium," which last year awarded Rio and BHP rate increases that averaged 85%, compared to Vale's 65%-71%. The Anglo-Australian miners had successfully argued that their ore, geographically located closer to China, costs less to ship and as such commanded a premium over Vale's Brazilian ore.
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