Vale SA, the world’s biggest iron ore exporter, wants Asian mills to accept about a 27 percent cut in annual prices, less than the reduction agreed by Rio Tinto Group with mills in Japan and Korea, a Chinese analyst said.
“Vale is seeking a cut of 5 to 6 percentage points less than the Australian accord,” Hu Kai, a Shanghai-based analyst with Umetal Research Institute, said today in an interview, citing Chinese steelmakers and banks he didn’t identify.
Michael Zhu, Vale’s China President, wasn’t immediately available for comment.
Mills in China, the biggest iron ore buyers, yesterday rejected the 33 percent cut in iron ore fines that Rio agreed last week as too little. Rio and BHP Billiton Ltd., which mostly mine in Australia, both won bigger increases than Rio de Janeiro-based Vale last year, and China will demand a bigger cut in Australian ore than Brazilian ore, the China Iron and Steel Association’s general secretary Shan Shanghua said Feb. 12.
“China should shoot for a same price cut from Vale as Rio’s accord with Japan, rather than tangling with Australia,” said Hu, “It’s impossible for the Australian suppliers to offer two prices to Japan and China for the same long-term contracts.”
Rio’s agreement with Nippon Steel Corp., JFE Holdings Inc. and Posco, Asia’s three largest steelmakers, doesn’t reflect changes in the global market and would result in losses for the mills, the China Iron and Steel Association said yesterday.
“China’s announcement wasn’t’ made casually,” Zou Jian, adviser and former chairman of the China Metallurgical Mining Enterprise Association, said today in an interview,. “China insists on the long-term benchmark system but China wants both the supplier and buyer sides to be more rational on pricing.”
Source: Bloomberg
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