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Baosteel Says Iron Ore Pricing Change Is ‘Reasonable’ |
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administrator |
DATE |
2010-03-29 17:44:36 |
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Baosteel Says Iron Ore Pricing Change Is ‘Reasonable’
Mon, 29 Mar 2010
Baosteel Group Corp, representing China in iron ore price talks, said it is reasonable to expect “adjustments” to the way the products are priced after a four- decade-old practice of annual settlement was discarded last year.
The breaking with tradition and a shortage of iron ore have led to tensions between producers and steelmakers, Baosteel Chairman Xu Lejiang said today in Shanghai. “The contract pricing system needs improvement, and some adjustments are reasonable,” he said without elaborating.
Vale SA, the largest iron ore exporter, is seeking shorter- term contracts that could boost prices by between 90 percent and 110 percent, according to Credit Suisse Group and UBS AG this week. Rio Tinto Group, the No. 2 supplier, yesterday said the system is broken after China, the biggest buyer of the material, last year failed to reach a price settlement.
“There’s still an iron ore supply shortage now,” Xu said. “But the situation will turn around” in the next few years, he said. Price talks this year are “very complicated”, he said.
Baoshan Iron & Steel Co., the listed unit of Shanghai-based Baosteel, fell 0.8 percent to close at 7.77 yuan today in Shanghai. Baosteel is China’s second-largest steelmaker. London- based Rio Tinto rose 1.8 percent to close at A$78.62 in Sydney.
Vale’s Demands
Brazil’s Vale is pushing to price the material on a quarterly basis in talks with customers, Xu said in an interview. Vale hasn’t indicated a specific price it’s seeking, Xu said.
BHP Billiton Ltd., the third-largest iron ore exporter, wants to price its products based on an index, Xu said. There are no talks currently ongoing with Rio, Xu said.
Prices were traditionally set annually from April 1.
Rising purchases from China, the biggest buyer, and a global economic recovery are tightening supplies and giving mining companies a stronger hand in talks. Chinese iron ore purchases jumped 42 percent and steel output in the country reached a record last year.
China’s iron ore consumption and steel demand may rise slowly “over the near term,” compared with the big increases in the past decade, Xu said.
Baosteel is seeking “strategic supply bases” in Africa, Canada and South America, Xu said. Chinese companies may find it easier to buy mines overseas when demand slows, he said.
Rio Tinto may settle prices on a quarterly basis, Sam Walsh, head of the company’s iron ore business, said in an interview in Singapore yesterday.
“The customers are well and truly aware of the pressure on annual prices,” Walsh had said. “The system is broken.”
Source from Bloomberg |
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