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Iron ore talks go into extra time

By Jiang Wei (China Daily)
Updated: 2009-07-01 08:06

A loader prepares to shovel iron ore in Port Hedland, Australia. [Reuters]

Though the annual iron ore pricing negotiations appears to be delayed as both sides are in no mood to back off from their respective stances, the country's steel industry does not seem to be too perturbed by the fact.

China's talks with the three major miners are still going on and it is still insisting on a 40 percent price cut from last year's price, Chen Xianwen, director of the China Iron and Steel Association's market department, was quoted yesterday by Xinhua News Agency.

But he declined to disclose any progress or China's schedule for the talks.

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Rio Tinto, the largest supplier, also seem to be in no mood to concede further ground than the one-third price cut it agreed with Japan and South Korea.

The end of June is usually the deadline for annual iron ore negotiations and buyers and sellers will have to trade on spot market from July if no agreement is reached. Although China has become the only major importer left without signing agreements with any international miners, insiders said a last-minute deal is unlikely to materialize.

Donghai Securities, a Shanghai-based brokerage, said the three international miners also have weak points in the talks, which may help the country steel industry to get a "China price".

Its steel research team noted: despite China's demand, global iron ore output is headed for a record surplus this year as production of steel is decreasing globally.

"Global iron ore consumption is expected to decrease 260 million tons this year from a year ago," it said based on calculation of steel production statistics in the first four months.

Therefore, the three miners need China, which may consume 60 percent of global iron ore this year, the team said.

What remains to be seen is whether China and the major miners can manage to reach a deal in the coming weeks and restore the security of a long-term contract or turn entirely to the spot market.