Bloomberg reported that Cia Vale do Rio Doce, Rio Tinto Group and BHP Billiton Ltd may get 30% less for the raw material this year under annual contracts after a slump in steel demand.
The drop, based on the median estimate of eight analysts surveyed by Bloomberg News, would snap six straight years of gains.
Mr Max Layton a commodity analyst at Macquarie Group Ltd in London said that “When you step back, things are still universally bearish and are likely to be like that for at least the next six months.”
According to data compiled by Macquarie, China’s steel industry, the world’s largest is seeking price cuts from iron ore suppliers after prices last year for raw materials and other ingredients such as manganese and coking coal soared to records. A 30% decline would be the biggest drop since at least 1981.
Iron ore producers are seeking an increase of as much as 5% in 2009 because they consider the market to have bottomed, the Wall Street Journal reported, citing unidentified people familiar with the talks.
Mr Eugen Weinberg an analyst at Commerzbank AG in Frankfurt said that “Unlike these producers, we see few signs of demand picking up again and do not believe that demand has bottomed out yet.” He wrote that “We rather see a danger of the spot price of iron ore coming under additional pressure and contract prices being hit accordingly.”