Qingdao scene of iron ore price negotiations
Iron ore prices for 2006 long-term contracts for
China will be negotiated during the Fifth
China International Steel and Raw Material Conference, which opens today (October 24) in Qingdao,
China.
Chinas forty-five key iron and steel enterprises have gathered in Qingdao to attend the three-day meeting on
Chinas steel products and raw materials. Representatives will negotiate
iron ore prices for the period of April 1, 2006, to March 31, 2007, with the worlds three largest
iron ore producers -
Brazil-based CVRD and
Australia-based
BHP Billiton and
Rio Tinto.
Chinas steelmakers and these three
iron ore producers signaled their intentions for the upcoming negotiations several weeks ago.
CVRD indicated that, based on its price increase of 71.5 percent in 2005, the 2006 export price of
iron ore in
Brazil will be increased by 10-20 percent. Mr. Fabio Barbosa, CFO of CVRD, said that
China is an impetus that drives up the international
iron ore market. He mentioned that he is full of confidence heading into this round of negotiations.
BHP Billiton and
Rio Tinto did not hint at a possible price increase, but pointed out that their sales and
production are favorable.
China Iron and Steel Association (CISA), one of the major participants in the negotiations, pointed out that
iron ore price should be decreased due to the oversupply. Sinosteel Corporation,
Chinas largest importer of
iron ore, echoed CISAs sentiments as they estimated that
iron ore prices in 2006 and 2007 will decline by 5 to 10 percent.
Players in the international market hold different attitudes towards the
iron ore price. In the third quarter,
iron ore prices are expected to slide by a small amount; however, it is predicted that
iron ore prices might actually see a slight increase. Furthermore, Morgan Stanley estimates that 2006
iron ore prices will climb five percent, while UBS Group forecasts a ten percent jump.
Chinese steelmakers have long prepared for the negotiations. The gathering of these 45
steelmaking enterprises shows their determination to engage in joint purchasing. Past failures to bargain on equal footing with the
iron ore giants has been due to the highly fragmented nature of
Chinas iron and steel industry.
SteelOrbis Shanghai