see article below FYI from mining...

see article below FYI from mining journal.com
http://www.mining-journal.com/Breaking_News.aspx?breaking_news_article_id=4991

China steel mills resist iron ore price rise

China resists Vale hikes
Chinese steel mills have resisted Brazilian miner Vale`s attempts to increase term iron ore prices for weeks, sources said, suggesting they will not easily agree to Vale`s demand for a 20% hike.
Steel industry sources in China confirmed that Vale had emailed Chinese customers a day ago to announce it would charge 20% more for iron ore from September 1, an exceptional mid-cycle increase in prices that are normally agreed on a full 12-month basis.
That would bring the increase in Brazilian ore in line with the bigger rise that Australian miners won in July, heaping more margin pressure on an industry struggling to pass on higher raw material costs to end-users.
China`s top mill, Baosteel, which takes the lead in negotiating term ore prices for all Chinese mills, is consulting with the government on an appropriate response after Vale approached it in mid-August, one industry source said.
"We are not likely to accept the demand. Iron ore prices are easing these days in China and the 20% increase sounds like an unacceptable demand," said another source at one of China`s largest steel mills, who declined to be named.
Chinese mills declined to comment on the demand. Japan`s Nippon Steel also declined to comment about whether it had also been approached for a price hike.
South Korean steel maker Posco said it had not had further negotiations with Vale since it completed negotiations in February.
A sharp fall in freight rates, which has made long-haul Brazilian shipments relatively cheaper compared with Australian cargoes, gave Vale the opening it needed to push for the additional increase, industry sources said.
Chinese mills have some cushion to stave off Vale`s demand, with stocks in Chinese ports hovering above 60Mt -- about one month`s consumption -- since the spring. Nonetheless, mills can not afford to ignore Vale.
"Vale`s strength is they sell super-high quality ore. Anyone making high-quality steel needs it to blend, and that leaves them in an extremely strong position," said an industry source.
The additional charge would mean that the price of South System fines from Brazil would increase by 86.4% compared with 2007, while Carajas fines from northern Brazil would increase by 92.4%, Steel Business Briefing reported on Wednesday.
High-quality Brazilian ore can now arrive in Northern Chinese ports at about US$144/t, just over the US$136.50/t for lower quality Indian spot ore. Australian fines cost about US$115/t, reflecting an unusually narrow premium for better-quality Brazilian ore.
Vale had negotiated a price rise with term Asian customers of 71% and 65%, depending on the grade of iron ore, for the year beginning April 1.
But its deal was eclipsed by Australian rivals Rio Tinto and BHP Billiton, which wrung out bigger increases from Asian mills in later negotiations based on the added savings due to the shorter shipping distance.
"It would explain the fact that the Brazilians are bitter over the better price the Australian`s were able to get this year," said James Wilson, an analyst for DJ Carmichael & Co in Perth.
"It would also help set the platform for next year`s negotiations, which will start in November."

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