http://business.theage.com.au/business/china-seeks-40-cut-in-iron...

http://business.theage.com.au/business/china-seeks-40-cut-in-iron-price-20090111-7eer.html

January 12, 2009
CHINESE steel mills are prepared to demand a 40 per cent iron ore price cut and the introduction of quarterly pricing as part of their bargaining during benchmark pricing negotiations with Rio Tinto and BHP Billiton.

"The demand for a drop of 40 per cent (in 2009 benchmark prices) is not unreasonable as China's domestic steel prices have dropped even below the 2007 level," a Beijing analyst told Platts, a metals trade publication.

The Age understands at least one large iron ore miner is privately expecting a 30 per cent fall in the benchmark price.

Australian ore miners received an 85 per cent increase in the iron ore price last year.

Vale and Rio Tinto, the world's two largest iron ore miners, have slashed production by 10 per cent since November in response to a lack of demand. BHP has not announced any production cuts, but it has been selling a large amount of its ore on the spot market at prices well below the benchmark price.

In a move that could bolster BHP's attempt to switch iron ore pricing to an indexed system rather than a benchmark price, Platts said China's Baosteel was seeking a quarterly pricing mechanism. Benchmark prices take effect on April 1, but Baosteel is apparently seeking to institute the quarterly system from this month.