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Pressure on China to end ore impasse

[ 2009-07-07 11:43]     字号 [] [] []  
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China is facing more pressure on the annual contract talks for iron ore supply, which is stalled with producers, because of the increasing cash prices.

Ore for immediate delivery rose to a four-month high of $82.50 a ton in the week ended July 3, according to Metal Bulletin.

The China Iron and Steel Association has rejected London-based Rio Tinto Group's offer of a 33 percent cut in annual prices, accepted by Japanese and South Korean mills, and let a June 30 accord deadline lapse.

"If spot prices move for a sustainable period of time to levels higher than the contract prices for 2009-10 set with South Korea and Japan, the willingness to hold out for a better outcome by the Chinese steel mills will lessen significantly," said Tim Schroeders, who helps manage the equivalent of $1 billion at Pengana Capital Ltd in Melbourne.

China's mills, who had demanded a cut of as much as 45 percent, are ready to discuss a reduction of between 33 and 40 percent, Caijing magazine reported last week.

They are aiming for an agreement by the end of this month and want Rio to consider contracts that run for less than a year, said Tian Zhiping, vice-president of Hebei Iron and Steel Group.

"A compromise could be made in which Chinese mills agree to the same terms as Japan, if miners concede quarterly or semi-annual price revisions," Peter Richardson, Melbourne-based chief metals economist at Morgan Stanley, said in a July 2 report. "Failing this, Chinese mills would have to risk the spot market price."

In fact, suppliers are offering to Chinese steel mills a 76 percent discount from last year's price under last year's contract that is still in place, Beijing Morning Post reported. It makes the prices for the Chinese market equal to the prices agreed by other Asian players.

"The pressure on the Chinese was always on after the Japanese and the South Koreans settled," said Prasad Patkar, who helps manage the equivalent of $930 million at Platypus Asset Management in Sydney. "They seem to be capitulating now that spot prices are firm and idled steel making capacity around the world is being brought on line."

To be sure, cash prices will struggle to move above $80 a ton for a sustained period in the absence of "a major positive surprise from non-Chinese demand, which for the moment remains elusive," Goldman Sachs JBWere Pty analysts Malcolm Southwood and Paul Gray said in a June 30 report.


1. Why have Chinese steel firms so far refused to agree to a price for ore imports?

2. How much were ore prices last week per ton on the open market?


1. Because they were hoping for a reduction in the price, greater than the 33% discount that was accepted by Japan and South Korea.

2. $82.50.

(英语点津 Helen 编辑)

Pressure on China to end ore impasse

Pressure on China to end ore impasseBrendan joined The China Daily in 2007 as a language polisher in the Language Tips Department, where he writes a regular column for Chinese English Language learners, reads audio news for listeners and anchors the weekly video news in addition to assisting with on location stories. Elsewhere he writes Op’Ed pieces with a China focus that feature in the Daily’s Website opinion section.

He received his B.A. and Post Grad Dip from Curtin University in 1997 and his Masters in Community Development and Management from Charles Darwin University in 2003. He has taught in Japan, England, Australia and most recently China. His articles have featured in the Bangkok Post, The Taipei Times, The Asia News Network and in-flight magazines.