China Has No Intention of Giving up Setting Iron Ore Benchmark Price

Luo Bingsheng, vice chairman of China Steel Industry Association, said Tuesday that China had no intention of giving up the "initial pricing power" of the ongoing iron ore price negotiations.



Chinese steelmakers are asking for price cuts of more than 40 percent for annual contracts of iron ore. Rio Tinto and Vale have accepted a 20-percent price cut.



There were reports that if Japan and the Republic of Korea (ROK) settled the iron ore price earlier this year in the negotiation, steelmakers in different countries might get a better price, as the steel output in the two countries was declining sharply in the first quarter despite an output increase in China.



Crude steel output rose 1.74 million tonnes year on year in the first quarter to 124.7 million tonnes in China, while large and medium-sized producers lost 3.31 billion yuan (484.9 million U.S. dollars) in the first quarter as steel prices returned to 1994 levels.



Japanese steel output in March fell 46.7 percent year on year to 5.74 million tonnes, dropping for the sixth straight month and that of the ROK was down 21.2 percent to 3.7 million tonnes as global demand for cars and electronics slowed.



"If the iron ore price was in line with our requirements, we would accept it. If others' agreements are not in line with our requirements, we will stick to our own claim," Luo told reporters Tuesday.



He said various miners and steel producers had come to the agreement that the global steel industry would generally see an over-supply this year, so miners should cut iron ore prices for the 2009 annual deal, but there was no agreement on the scale of the cuts.



In the similar development, Michael Zhu, Vale's China president, said Tuesday at an industry conference in Beijing that the Brazilian mining giant would cut iron ore output by 25 percent this year.



The 65-percent price rise of iron ore agreed last February between Japanese, ROK steelmakers and leading Brazilian iron ore supplier Vale set the 2008 benchmark price.



China's leading steelmaker Baosteel in December 2006 beat other buyers in setting the iron ore price for fiscal 2007 with a slight 9.5-percent price rise. The lower-than-expected increase was deemed a success for Chinese buyers

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