Iron ore producers Rio Tinto Group,, BHP Billiton and Vale (formerly Companhia Vale do Rio Doce) are seeking a price increase of as much as 5% in annual contract negotiations because they think the market has bottomed out, the Wall Street Journal is reporting, citing people familiar with the talks.
A price increase of 5% in China and Japan, though well below the 70% to 85% levels of last year, would set a benchmark price for iron ore that steelmakers around the world would follow. Any price hike will be unpopular and opposed by steel mills worldwide, which has scaled-back production in the face of collapsed demand.
There has been little spot-market reaction in ore prices to reports from Rio Tinto, the world’s second-biggest iron ore producer, that flooding has closed its two main iron ore rail lines in Australia--which may cause force majeure on near-term shipments
The Wall Street Journal report says that the mining firms believe a recent uptick in demand from China may have signalled that the market has bottomed out. China’s steel production in January jumped 9.9%, or 3.7 million metric tons, from December and several analysts were suggesting that further steelmaking expansion would occur in February. One analyst, for example, wrote clients that “increased Chinese production would spread a bit of optimism to the rest of the world.”
However, Xinhua news service reports from China say the early-2009 pickup in steelmaking has ended. And, United Press International today is quoting China Iron and Steel Association’s executive deputy director Luo Bingsheng as saying the market for Chinese steel hadn't shown signs of recovery and steelmaking has gone into a sharp decline. “The financial crisis and the domestic economic slowdown resulted in contraction in both overseas and domestic markets,” Luo said Monday.
Source: Purchasing.com
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