According to the quarterly report issued by the world's largest iron ore producer Brazilian miner Vale on May 5, the company has already reached quarterly pricing agreement with customers worldwide, with 100 percent of its contracts priced according to the quarterly pricing system. Undoubtedly, the Chinese steel producers take their place among the main customers of Vale, which means that the Chinese mills have already accepted the quarterly pricing system, following the example of the Japanese and South Korean mills.
On May 5, Shanghai-based steel giant Baosteel said that, although the iron ore talks are still in process, Chinese steelmakers have already reached an initial agreement with the three mining companies and will pay any differences in price after the conclusion of the talks. Ma Guoqiang, general manager of Baosteel, stated that the import price of iron ore for most Chinese steelmakers is in the range of $105-110/mt, up 100 percent year on year.
In 2009, China imported 628 million mt of iron ore, up 184 million mt compared with 2008. Since China imported 155 million mt of iron ore during the first quarter of 2010, given the 10 percent growth rate in Chinese steel output, China is expected to import over 650 million mt of iron ore in 2010. Given $50/mt increase in the iron ore price, China's iron ore import costs may increase by RMB 200 billion ($29 billion) in 2010.