It is reported that the annual price negotiation between the world’s biggest iron ore miners and Chinese steelmakers has so far failed to have any results. However, the three miners are now taking new actions in order to have China give way to its will proposing 67% discount of advance payment. This discount just equals to the 33% drop of negotiated price between Rio Tinto and Japan underscoring its firm stand in this year iron ore talk.
China Iron and Steel Association, or CISA, which heads this year’s talks on behalf of Chinese steelmakers, insisted that iron ore prices should fall back to 2007 levels. That would mean a price cut of more than 40 percent in the annual contracts of iron ore. However, China started to compromise a bit now. On June 30th CISA agreed within itself that it could accept a price drop smaller than 40%, but it would definitely not nod head to the 33% drop.
On May 26th Rio Tinto, the world’s third-largest miner, agreed with Japan’s Nippon Steel Corporation and South Korea’s Pohang Iron and Steel Company to cut its iron ore powder price by 33%. Very soon other Asian countries and regions have all followed up the price, leaving China to continue in the negotiation.
A person in charge of a steel mill said that it has accepted the 67% discount of advance payment, compared with the previous 80%. "BHP Billiton and Companhia Vale do Rio Doce have also proposed to charge advance payment at the discount and when this year’s negotiation is concluded, they will return the overcharge or demand payment of the shortage according to the negotiated price".
As the 67% just equals to the 33% drop it has agreed on with Japan and Korea, it’s quite clear that they are still adhering to the original plan. Mr Xu Xiangchun from mysteel.com said that "All they are doing is trying to bring things to pass under their will. Once China’s accepts the proposal of advance payment, the iron ore miners can latter demand China to give way to its wanted 33% drop more conveniently."
It’s now unclear how many steel mills in China have accepted the request of such an advance payment. CISA is still striving in hope of getting a bigger cut for China’s steelmakers. As CISA has started to compromise a bit, Mr Shan Shanghua expressed that the annul price negotiation will soon be concluded.