re: nippon steel falls in line 9.5 p cent
Nippon Steel, JFE Agree Iron-Ore Price Increase (Update1)
By Shigeru Fujimoto
Dec. 26 (Bloomberg) -- Nippon Steel Corp., the world's second-largest steelmaker, and domestic rival JFE Holdings Inc. agreed a 9.5 percent gain in iron-ore costs with Brazil's Cia. Vale do Rio Doce, matching an increase set by China's mills.
The Japanese companies accepted the rise in the price of the steel-making raw material from the world's biggest exporter of the commodity for shipments next year, spokesmen for the two producers said in separate telephone interviews today.
China, the world's fourth-largest economy, has been attempting to exert more influence in a slew of commodity markets as its manufacturers consume more metals and coal. Baosteel Group Corp., the nation's biggest steelmaker, settled prices with Vale on Dec. 21. It's the first time China set a benchmark price increase for steelmakers worldwide.
``Raw material costs for steelmakers next year may be similar to this year,'' said Kim Gyung Jung, an analyst at Samsung Securities in Seoul. ``The rise in iron ore prices will be offset by lower prices for hard coking coal.''
Global iron-ore contract prices rose for the past four years, including a 19 percent gain in 2004, a 72 percent rise in 2005 and a 19 percent gain this year amid increasing demand, led by China. The nation, the world's top steelmaker, overtook Japan as the largest iron-ore buyer in 2003.
BHP, Rio Tinto
BHP Billiton Ltd. and Rio Tinto Group also agreed a 9.5 percent increase with Baosteel. Vale, together with BHP and Rio Tinto, account for two-thirds of global iron-ore trade.
A 9.5 percent rise in the price of iron ore is equivalent to an increase of about $7 a ton for the commodity, Takashi Murata, an analyst at the Daiwa Institute of Research in Tokyo, said Dec. 22. Still, as hard coking coal prices will fall next year by about $17 a ton, steelmakers could more than offset the higher ore price against those lower costs.
The settlement on Dec. 21 was the earliest date since 1996. China accepted the 19 percent increase in 2006 prices in June after more than half a year of talks, and following a decision between ThyssenKrupp AG and suppliers. In March, China's government intervened, saying it would not accept any increase, and accused suppliers of ``huge and unreasonable'' profits.
A person answering calls to Vale's offices in Rio de Janeiro said no one was available to comment on the increase accepted by Japanese mills.
Ko Min Jin, a spokeswoman for South Korea's Posco in Seoul, said the company was close to finalizing an agreement with Vale.
To contact the reporter for this story: Shigeru Fujimoto in Tokyo at [email protected]
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