Cao Huiquan, general manager of Chinese steelmaker Hunan Valin Steel, stated on March 30 that, as the major iron ore companies dramatically increase their prices, Chinese steel mills are finding it harder to pass on the rises costs to downstream industries. In the future, the profits of domestic steel mills will decrease and this may accelerate the merger process in the Chinese steel industry, he stated.
Mr. Cao stressed that, whereas before the financial crisis domestic steel mills were able to pass on rising cost prices, the current situation is different. The crisis has totally broken down the ability to transfer costs, he said. Mr. Cao added that, if the long-term contract price negotiation breaks down, the market will adopt spot market prices or will accept a 100 percent price increase price. Thus, steel mills' profits would fall in the future.