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BEIJING, Feb. 25, 2010 (Xinhua News Agency) --

The China Securities Journal reported that Chinese steel mills are still in talks with international iron ore giants, and haven't yet reached any agreement on iron ore prices for 2010.

The China Iron and Steel Association (CISA) has not yet commented on the negotiations, either.

Chinese steel plants rebutted previous media reports that the country's five major refining enterprises have already accepted a 40 percent price rise for iron ore with Rio Tinto, BHP Billiton (OOTC:BHPLF) (NYSE:BHP) , and Vale.

Data released by the CISA show that China's iron ore imports in 2009 rose 41.5 percent on year to 628 million metric tons, accounting for 62 percent of its total iron ore supply. However, prices for ore imports slumped 34.19 percent last year, compared with a 33 percent price cut reached between Rio Tinto and steel plants in Japan and South Korea.

Analysts with information provider MySteel.com note that iron ore prices are expected to rise this year, but are unlikely to climb 40 percent. A 20 to 30 percent price rise is reasonable, they believe.

However, industry insiders say that some small and medium sized steel enterprises may accept such "temporary pricing" since it is difficult for them to purchase iron ore at long-term contract prices. If they go to the spot market in search of resources, the prices they find will be more than 40 percent above last year's set contract prices.

Last year, the Indian government raised its tariffs for ore products and Australia reduced its spot iron ore supplies. Steel industry researchers believe their moves are aimed at keeping iron ore prices high and maintaining their favorable positions in price negotiations.

Australian iron ore producer FMG forecasted that iron ore prices will rise sharply in 2010 and 2011. FMG is now operating at full capacity to satisfy demand coming from China.

Under heightening cost pressures, many Chinese steel mills recently lifted manufacturer prices. Domestic top steel producer Baosteel raised its March prices by 200 to 700 yuan/metric ton. Shagang and Bengang also adjusted up their prices. (Edited by Liu Xiaoyun, [email protected])


(Source: iStockAnalyst )