Reports from China suggest that despite high iron ore imports into China, the China Iron & Steel Association is still pursuing a cut of at least 40% in contract prices from last year's benchmark, supported by the facts that steel prices are still falling and inventory is increasing.
China imported iron ore resources of 131.5253 million tonnes in Q1 2009, up 20.8611 million tonnes or 18.85% year-on-year, and steel product outputs in this period came to 144.7289 million tonnes, up 3.9058 million tonnes or 2.77%.
Head of Vale China Mr Zhu Kai had expressed his optimism on the Chinese market saying they are further developing this market.
Insiders say the 'big three' miners have deliberately been putting off talks expecting to see a better Chinese steel market in the second and third quarters.
A Xiamen-based trader says this is consistent with their strategy. Iron ore sellers have press down the price to attract larger imports of the resource and create a 'fake surge' in demand ultimately obtaining a bigger leverage in the talks. Part of the iron ore stockpiles at seaports are being stored by ore suppliers for spot selling.
Mr Luo Bingsheng said 70 million tonnes are more than double monthly imports and a normal level of the stock should be some 30 million tonnes. The key is that Chinese demand has not risen. A surge imports will not become their bargaining chip but may instead drag down the market price as a whole. With more and more resources piling at the ports, the spot iron ore import price plunged to USD 60 per tonne by end of March.
Mr Luo affirmed that Chinese steel market will not recover for some time, which will pull back the contract price of iron ore.
Source: Steel Guru/Economics Reference
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