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Tough negotiations with ore giants to continue after FMG deal
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15:55, August 19, 2009

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China will continue to negotiate with Rio Tinto, BHP Billiton and Companhia Vale do Rio Doce (CVRD) referring to the agreement concluded with Australia's Fortescue Metals Group Ltd (FMG). This means that this year's negotiations have not yet been completed.

Umetal.com analyst Hu Kai believes that because FMG's iron ore is of a lower grade than that of the three iron ore giants and its volume of iron ore is not large enough, at present FMG's iron ore is still unable to completely replace that of Rio Tinto and BHP Billiton and it is also not possible that the three iron ore giants will accept the “China price” agreed by FMG and China.

At present, there are 70 to 80 million tons of iron ore reserves at China's ports. Together with FMG's output, China will have no problem meeting its demand until the end of this year if it imports iron ore only from FMG.

In addition, at present over a quarter of China's iron ore is imported from India. The amount of iron ore imported from emerging powers like South Africa and Ukraine increased rapidly in the second quarter of 2009. For example, in the second quarter, China imported 34 million tons more than in the first quarter, and over 10 million tons of this was imported from these emerging powers. That means that China will have no problem in its supply without depending on imports from Rio Tinto and BHP Billiton.
 
Mysteel.com senior analyst Xu Xiangxun believes that negotiations may become more difficult and that iron ore negotiations in 2009 are far from over.
  
December each year marks the start of a new year's iron ore negotiations. Xu said that because iron ore negotiations this year are unexpectedly difficult and have not yet been concluded, it is hard to predict the framework of iron ore negotiations for 2010.

By People's Daily Online



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