CISA to allow individual negotiations

16:38, April 29, 2010      

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The China Iron & Steel Association has made concessions to BHP Billiton, Rio Tinto and Vale, saying Wednesday for the first time in public that steel mills can negotiate separately with the three iron ore miners on purchasing contracts.

"The three iron ore miners are threatening with a supply chop unless domestic steel mills accept their price hike claim before the deadline, which is 90-100 percent higher," Luo Bingsheng, deputy chairman of CISA, said in a quarterly press conference.

Luo also acknowledged some domestic mills had signed tentative agreements with the mining companies and said the mills could talk with the three iron ore suppliers in line with CISA rules, bypassing China's national steel lobby.

The steel lobby had forbidden its members from signing contracts until a national benchmark deal was reached. But the negotiation deadline passed April 1 with no deal.

A CISA staffer didn't offer a contradiction when asked if Luo's remarks indicated the price negotiations were over.

A staff member with one of the biggest domestic iron ore traders, who spoke under conditions of anonymity, told the Global Times the three miners began to cut supplies to the company earlier this year when the 2010 iron ore talks began. The source's company supplies iron ore to many large domestic steel mills.

"Defficient supply has been shoring up prices. That will dilute the profits of steel mills," the source said.

Steel analyst Zhang Lin of Beijing Lange Steel Information Research Center told the Global Times that the possibility that the two parties have reached an agreement on a quarterly pricing system couldn't be ruled out.

Du Wei, a Umetal analyst, said steel mills might get different prices from iron ore miners this year.

Luo highlighted the importance of domestic steel mills investing in foreign iron ore mines to reduce their dependence on foreign ore suppliers.

Source: Global Times


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