It is reported that iron ore price talks between world's leading ore miners and Chinese steel mills were continuing and market insiders suggest that Chinese mills should concede the position of leading negotiator to their counterparts in Europe and Japan, who are grappling with more grim economic recession.
Japan has suffered GDP decline of 0.7% last year, the first drop in nine years. And the economic recession is set to linger on this year. EU central bank predicts that economic growth in euro zone would either keep flat or shrink by 1% in 2009. Nevertheless, leading institutes are confident that China would maintain growth rate between 5.5% and 8% this year, and China's economy has already shown sign of recovering supported by Beijing's stimulus package.
As a result, domestic steel price has steadily rebounded for three straight months since last November with price rally of 15% to 30% from the bottom level. And spot ore import price has increased 20% from three months ago, while domestic ore price also climbs over 15%. By contrary, European steel price has skid 18% to 20% in the same review period. Meanwhile, Chinese pig iron output has returned above 40 million tonnes in January after falling below the benchmark line in past four months. And the imported iron ore tonnage has also hit a eight-month high of 32.65 million tonnes in January.
Industrial sources, however, steelmakers around the world are cutting production, shutting plants and laying off workers. EU 27 countries have reported pig iron output halved to 5.2 million tonnes in February and Japan has seen a sharp decline of 27% to 5.5 million tonnes in the same month. Therefore, European and Japanese mills are more eager to push for sharp cut on contract ore prices due to plummeting demand for iron ore. Chinese mills should better hold back and let them lead the ore talks this time.