ore price hike, page-6

re: re:rio ore price hike 9.5 p cent Baosteel settles deal with 3 major iron ore providers


www.chinaview.cn 2006-12-23 00:45:29


SHANGHAI, Dec. 22 (Xinhua) -- After an agreement with Brazil's Companhia Vale do Rio Doce (CVRD) on Thursday, Shanghai-based Baosteel Group agreed iron ore prices with the world's other two main producers, BHP Billiton and Rio Tinto, on Friday evening.

The price of the iron ore provided by the two Australian corporations will also rise 9.5 percent for the next financial year, said a source with Baosteel.

Baosteel has completed price negotiations on behalf of all China's steel mills with the world's three leading iron ore providers, a task that insiders had predicted would be difficult or even fruitless.

Baosteel is the first steel company in the world to settle contracts with the three giants for the financial year beginning on April 1, 2007.

It is also the first time in four years that China's steel companies have directly agreed prices with the big providers rather than following the benchmark price settled by foreign companies.

Insiders said the agreements would set the standard for price negations for foreign steel companies for the 2007 financial year.

Baosteel failed to reach agreement on prices with the world's three main iron ore providers for three successive years, squeezing margins for China's steel companies.

The three iron ore giants raised prices for Chinese steel mills by over 70 percent in the 2005 financial year.

The steel companies were forced to accept a 19 percent rise this year.

Market analysts said the 9.5 percent growth rate basically reflected the supply and demand situation in today's world iron ore market.

Though China still had a growing demand for iron ore, the growth rate had slowed.

On the other hand, China has seen a decline in domestic steel consumption this year and the country's fixed assets investment in the iron and steel industry slowed.

Analysts said the shrinking growth rate of the iron ore price also reflected the balance of interests between China's steel makers and the international iron ore providers.

China is the world's largest iron ore consumer and it certainly needed the support of the international iron ore providers, said a senior manager with Baosteel.

But, he said, the leading iron ore providers had also grown dependent on China's steel industry. As a result, a long-term stable strategic cooperative relationship should be formed