Chinese steelmakers may seek iron ore price decrease
According to the news in the local press,
China's steel mills may ask Australian and Brazilian
iron ore producers to reflect the drops in
freight rates on the
iron ore prices.
Currently, the steel mills in
China are holding high inventories. The steel prices continue declining and they are not expected to recover until the end of the third quarter.
Therefore, Chinese steel mills are planning to reduce their
production and they do not find
iron ore prices as low enough to buy and continue their
production.
Shipping activities from
Australia and
South America to
China are sluggish currently and
freight rates have fallen dramatically almost 50% from their levels of two months ago.
China's major steel producers such as Baoshan Iron & Steel Co. Ltd., Wuhan Iron and Steel Co. Ltd. and
Angang New Steel Co. Ltd had agreed to increase their
iron ore purchases in 2005 at least 20% from 2004.
Major
iron ore miners, Brazilian Companhia
Vale do Rio Doce (CVRD), Australian
Rio Tinto and
BHP Billiton feel confident about their sales due to the “20% more purchase” in their long-term contracts with Chinese buyers.
However, it should also be noted that a month ago Chinese steelmakers convinced
BHP Billiton not to add a
freight premium on its prices.