Action seems to be hotting up on the iron ore price negotiation front with steelmaker Baosteel Group replacing China Iron and Steel Association as the chief negotiator for the Chinese side in its talks with the big three iron ore suppliers, BHP Billiton, Rio Tinto and Vale.
The negotiations, which are likely to start by the end of December, also assume significance against the backdrop of Rio and BHP further consolidating their mining operations over the weekend.
Baosteel, the country's largest steel mill, was always at the forefront of the iron ore pricing talks since 2003, but was replaced by CISA this year as prices continued to increase.
The bitter and protracted row over the ore talks raised doubts in industry circles on whether the association was the right candidate to spearhead the negotiations.
Mr Yu Liangui, a steel analyst with Mysteel Research Institute said “Next year's iron ore talks could see results, as Baosteel has several years of experience in iron ore talks. They are also capable of formulating decisions that can best encompass the prevailing market trends.”
Mr Yu said “It would suit Baosteel better if it is able to reach a first price agreement with Vale as it is a long-term price advocator. Such a move would also be a blow to BHP, which always prefers to use the spot price to follow the long term price.”
However, he warned that inordinate delays in fixing a price would be detrimental for Chinese steelmakers as prices may go up once the global economy starts recovering.
This year's iron ore price negotiations reached an impasse in June after China's chief negotiator CISA insisted on a 45% discount over last year's prices, after a 33% cut in benchmark iron ore prices had been reached by the "Big Three" with other Asian steel mills. Chinese steel mills have since then started sourcing ore supplies from the spot market or signed individual contracts with the "Big Three", for a 33% to 28% cut, without revealing details.