China supports Eurofer's "outrage" at massive iron ore price hike

10:40, March 17, 2010      

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Iron and steel manufacturers in China and Europe are incensed over the surging price of iron ore.

China Iron and Steel Association (CISA) joins the European Confederation of iron and Steel Industries (Eurofer) in expressing "outrage" at the iron ore industry for ratcheting up iron ore prices, the association announced yesterday on its Web site.

Eurofer said last week it was "outraged" by such increases, which they claim would hurt Europe's economic recovery.

"On the afternoon of March 11, Eurofer made a statement on its website strongly opposing the intention of iron ore producers to raise prices by 80-90 percent. The China Iron and Steel Association expresses its approval and support for this statement," says the CISA.

"Maintain the annual contract mechanism"

BHP Billiton, Rio Tinto and Vale SA are seeking pricing that covers shorter periods after spot market rates soared to more than double last year's contract agreement. Vale is seeking to raise contract iron-ore prices by more than 90 percent in negotiations with Japanese steelmakers, Nikkei English News reported March 10.

China's large steel producers will be greatly impacted if the year-long co-pricing mechanism is abandoned. Analysts point out that China's steel mills still have time to deliberate before making a decision, as the iron ore producers and Japanese and South Korean steel mills have yet to reach an agreement.

"The Ministry of Commerce (MOFCOM) will provide support to Chinese steel producers, including means of trade actions," Yao Jian, spokesman of the ministry said yesterday.

Yao made it clear that China, the world's biggest iron ore buyer, will stick with an annual pricing system.

"We hope that suppliers, the steel association and Japanese and Korean steelmakers can together maintain the mechanism and prevent price volatility," Yao told reporters.

Rising demand

Last week, Shanghai-based Baosteel Group, China's largest steel producer, announced will increase prices by $22 to $44 per ton starting in April.

In the first two months of 2010, China's crude steel output increased 25 percent from the previous year to nearly 103 million tons.

Rio Tinto yesterday released its annual report, showing their optimism about the long term growth prospects.

"The exponential growth of China's demand for iron ore, copper, coal and aluminum is expected to continue over the next 15 years, as the average wealth of many millions of people increases," said Rio Tinto CEO Tom Albanese.

"An objective for 2010, and one that I am particularly focused on, is to strengthen our relationship with China," Albanese said.

China's interests

"A 90 percent iron ore price hike will push Chinese steel mills to raise prices of steel products, and raise the possibility of inflation," said a steel analyst.

More than 10 of China's largest steelmakers, including Baosteel Group and Wuhan Iron & Steel Group, have appealed to Chinese Premier Wen Jiabao to help represent them in the iron ore negotiations, the China Securities Journal reported.

"As the world's biggest iron ore consumer, China's interests should be appropriately reflected in the price talks," Yao said today. "Before the price is decided, it's hard to say what measures will be taken, but we do have policies prepared for that eventuality."

By People's Daily Online
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