Recent events on the threshold of iron ore contract negotiations

SteelOrbis Shanghai Even though the iron ore negotiations for 2006 were concluded fairly recently, preparations for the 2007 global talks are already underway, with the official opening scheduled for late October-early November. Ahead of the vital talks, both the supply and demand parties are already preparing the terrain with a view to claiming advantage for their respective positions in the negotiations. From China's standpoint: 1. On September 12, the China Iron & Steel Association (CISA) gathered the top leaders of 70 mills at Jiangxi Nanchang for an internal meeting. The purpose of this meeting was to enhance the qualification of mills that can import iron ore, so as to improve the unity of the Chinese mills at the negotiations. Sources reported that the China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters (CCCMC) suggested enlarging the Chinese negotiation team. Therefore, the CCCMC and the China Steel Group are now expected to join the negotiation team formed by the 16 leading mills. 2. On September 16, Luo Bingsheng, CISA Standing Committee Vice-Chairman and General Secretary, declared at the 2006 China Iron & Steel Raw Material Market Conference that the fact that the Chinese mills would attend the negotiations under the rules set by the other parties was unfavorable for China. From the standpoint of the international ore giants: 1. On September 18, Rio Tinto took the initiative in exchanging ideas with Chinese steel giant Baosteel regarding future cooperation. As one of the major iron ore exporting countries, Australia is also preparing the negotiations on iron ore for 2007. 2. BHP Billiton and Rio Tinto both attended the third China International Production Safety Conference held in Beijing from September 19 to 21. On September 21, Chip Goodyear, CEO of BHP Billiton, made a speech at Beijing University. The top Rio Tinto officials held a press conference on production safety cooperation between China and Australia. It seems that the international giants are trying to create a favorable atmosphere for the upcoming negotiations. 3. On September 21, Companhia Vale do RioDoce (CVRD) announced that it had inked a long term supply contract with two Chinese steel mills. It also indicated that since China would boost the global demand for iron ore, maybe they would sharply hike their prices in 2007. Interestingly, as one of the three major ore suppliers for China, India is facing fierce disputes on iron ore exports between its domestic mines and steel mills. The Indian steel mills hope their government will limit iron ore exports, thus reserving resources for the future development of the mills. On the other hand, India's Ministry of Mines has urged the government to allow the continuation of exports. R K Sharma, General Secretary of Indian Association of Mining, indicates that if the current market mechanism is disturbed, many private mines will go bankrupt and that this could directly lead to the loss of the jobs of more than 1 million mining workers.