Baosteel: Mining giants should reduce their iron ore prices

Monday, 19 July 2010 17:44:53 (GMT+2)

Major Chinese steel producer Shanghai-based Baosteel has recommended that the three iron ore giants (Vale, Rio Tinto and BHP Billiton) should seriously consider lowering their prices of iron ore so as to reduce the cost pressure shouldered by steel companies worldwide. Xu Lejiang, president of Baosteel Group, said that reduced prices of iron ore are a must given the oversupply situation observed in China's iron ore market.

Mr. Xu said that China has not reached agreement with the three iron ore giants regarding the quarterly pricing system, but has adopted a system of shorter-term contracts. According to the contract price reached between Japanese steelmakers and the mining giants, the iron ore contract price for the third quarter this year is $149/mt.

Since the spot prices are lower than the short-term price reached between the leading domestic steel producers and the three giants, many medium- and small-sized mills have started to purchase spot iron ore. However, Mr. Xu said that even at lower spot prices the large Chinese steel producers would still not turn to the spot market.

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