Negotiations so far between Chinese steelmakers, the world's largest iron ore buyers, and three major iron ore suppliers indicate that the annual iron ore price talks are likely to drag on. In this year's talks, Chinese steelmakers are pressing for the first iron ore price cut in seven years as the global recession has crimped demand from the automobile and construction industries, resulting in losses for more than 60 percent of mills in the country.
Anshan Iron & Steel Group has stated that Chinese steelmakers are calling on the big three mining companies, Vale, BHP Billiton and Rio Tinto, to cut annual iron ore prices by between 40 percent and 50 percent. Anshan president Zhang Xiaogang declared, "The 40 to 50 percent cut is a consensus reached by both domestic and international steelmakers. I think it's reachable. We don't have excessive iron ore stockpiles. We are waiting for the negotiation results. We had a profit in the first two months. But it's very small."
In his turn, Deng Qilin, chairman of Wuhan Iron and Steel (Group) Corp. and new chairman of the China Iron & Steel Association (CISA), stated, "China has no deadline for the annual iron ore talks with the three biggest miners. Based on the current market conditions, iron ore prices should drop."
Meanwhile, Hebei Iron and Steel Group chairman Wang Yifang said the position of the Chinese mills was still to return to 2007 pricing, with the contract date to start from January 1 rather than April 1. Mr. Wang said a plan to mandate mills to resell unused contract iron ore in the spot market for a fee would help stabilize prices. The plan, which is being promoted by the CISA, still needs the support of the government and the smaller mills.
However, Beijing-based Shougang Corp. chairman Zhu Jimin said domestic steel prices were once again heading downwards, adding that the situation looked more severe than last year and that it would take a long time for steel prices to recover. According to Zhu Jimin, the three miners are waiting on the sidelines, still judging the impact of the global recession on the steel sector.