Vale may cut iron ore export prices as sluggish demand hits spot price

10:11, August 30, 2010      

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The world's largest iron ore producer Vale SA may cut iron ore prices by about 10 percent, the first reduction in a year, indicating the miner has begun to consider demand when setting prices.

  Vale will define new prices this week, following a drop in spot prices in China in the past few months, daily O Estado de Sao Paulo quoted director of development Jose Carlos Martins as saying. The paper said the average price of iron ore will likely fall to $135 from $150 per ton.

  The likely cut will reverse, if put in place, a 170 percent increase in iron ore prices this year. The decision, made as part of a quarterly revision of market prices, comes after a fall in demand in China, the top global consumer, a spokesman of Vale told AFP.

  China's share, the largest of Vale's buyers, in Vale's sales revenues fell to 28.1 percent in the second quarter from 39.1 percent a year ago.

  Ma Zhongpu, chief analyst with the steel research company Umetal, told the Global Times that the final price might be reduced 10 percent thanks to weak demand worldwide, particularly in China, the world's largest iron ore consumer.

  China's crude steel fell to a five-month low in July due to weak demand. Iron ore imports were reduced in April, May and June.

  Steel analyst Wang Zhe with China Securities told the Global Times that it is hard to see the reduction's influence on profits of domestic steel mills because future demand for steel is hard to predict.

  In the first half, profit margins of 77 large- and medium-sized steel mills was only 3.47 percent.

  Luo Bingsheng, vice-chairman of China Iron &Steel Association, said August 3 that about 40 percent of the country's steel mills had been forced to make cutbacks due to climbing iron ore costs and falling steel prices.

Source: Global Times


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