china mills seek jan 1 io price reneg, page-2

China mills seek early end to high-priced iron ore contract

Beijing plans to use less iron ore, wants 25% price cut for 2009
By Tom Stundza -- Purchasing, 12/5/2008 11:49:00 AM
The China Iron & Steel Association (CISA) is seeking to shift the start of it 2009 benchmark iron ore supply contract from April 1 to January 1, renegotiate prices to be paid Brazilian and Australian miners in fiscal 2009 and reduce the ore to be purchased.

Steel Business Briefing, an online subscription newsletter, says CISA has summoned Vale, BHP Billiton and Rio Tinto to Beijing to terminate the 2008 contract period three months ahead of time. Steelmakers in China are paying Vale 65-71% more in fiscal 2008 than in fiscal 2007, and the Australian miners 85% more their iron ore. “Chinese mills simply can’t afford to take shipments in the first quarter of 2009 under the benchmark price of 2008,” a CISA source is quoted by SBB.

Because they now are the world’s largest steelmaking complex, the Chinese steel mills have been setting the pace lately for global iron ore prices. Analysts in Melbourne, Sydney and Shanghai believe the Chinese mills are seeking a 25% reduction in iron ore costs and almost that much of a reduction in shipments because of the expected reduction in world steelmaking in calendar 2009. Both BHP Billiton and Rio declined to comment today on the negotiations.


Anotehr