The Chinese business newspaper, Shanghai Securities News, has reported sources close to the iron ore talks as suggesting that the ore mining giant who settles the benchmark contract ore price first with Chinese buyers will be awarded the largest contracts.
The move has come as leading ore miners are trying to put off negotiations and scale back output in a bid to reverse the downward trend in prices. The Brazilian miner Vale, which usually settles first, is apparently waiting for BHP Billiton and Rio Tinto to take the lead.
The source said global steel production and iron ore demand are set to slump this year, so is Chinese iron ore demand. However, China would remain the biggest importer of iron ore and therefore China would play the card of aggregate demand with the top three ore miners and award the biggest purchase contract to the one who strikes the deal first.
The China Iron & Steel Association has already calculated the iron ore demand of most domestic mills and traders in an industrial meeting in January.
Mr Zhang Xiaogang general manager of Angang hopes Big Three to cut benchmark ore price by 40% to 50%t this year. He said that "With falling steel prices, the raw materials price is set to drop. That's why Indian spot ore imports price has been sliding recently. Domestic iron ore price and freight rates continue to head downward from late February again after a short blip.”
The Australian Business reported that falling steel prices in China spell clear warning signs that may lead to iron ore prices declining as much as 40% in 2009. ANZ said this is far deeper than market expectations of a 20% to 30% drop.
Source: Steel Guru, Shanghai Securities News
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