Iron ore price talks between world's leading ore miners and Chinese steel mills are continuing but some market insiders are suggesting that Chinese mills should concede the position of leading negotiator to their counterparts in Europe and Japan, who are grappling with a deeper economic recession.
Japan suffered a GDP decline of 0.7% last year, the first drop in nine years and the economic recession is set to linger on this year. The EU central bank predicts that economic growth in the eurozone would at best remain flat or it would shrink by 1% in 2009. Nevertheless, leading institutes are confident that China would maintain a growth rate between 5.5% and 8% this year, and China's economy has already shown signs of recovery supported by Beijing's stimulus package.
As a result, the domestic steel price has rebounded for three straight months since November with a price rally of 15-30% from the bottom level. And the spot ore import price has increased 20% from three months ago, while the domestic ore price also climbed by over 15%. Meanwhile, the European steel price has fallen by 18-20% in the same period. Chinese pig iron output has returned above 40 million tonnes in January after falling below that benchmark line in the past four months. The imported iron ore tonnage has also hit a eight-month high of 32.65 million tonnes in January.
However, steelmakers around the world are cutting production, shutting plants and laying off workers. EU-27 countries have reported pig iron output halved to 5.2 million tonnes in February and Japan has seen a sharp decline of 27% to 5.5 million tonnes in the same month. Therefore, European and Japanese mills are more eager to push for a sharp cut on contract ore prices due to plummeting demand for iron ore.
Chinese mills might be better holding back and let them lead the ore talks this time.
Source: Steel Guru
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