Chinese steelmakers association rejects 33pct reduction in iron ore price
The China Iron and Steel Association (CISA) said it will not accept the 33% reduction in the annual iron ore contract price agreed to by Rio Tinto and other Asian mills.
Rio Tinto reached a deal with Nippon Steel Corp. last Tuesday. South Korea's Posco Thursday agreed to a price cut with Rio Tinto ranging between 33% and 44%
CISA said the price cut of 33% for iron ore fines and 44% for lump doesn't truly reflect this year's "Changing supply-and-demand conditions in the international iron ore market. The association said it will push the domestic steel industry into floating on a sea of red inks.
Executives at Chinese steel mills want a deeper cut because a 33% reduction means contract prices are even higher than domestic spot market prices.
"The price didn't represent the mutual interests and win-win relationship between steel makers and iron ore miners. China's iron and steel enterprises won't accept the prices and won't follow suit," CISA said.
Reuters reported that this year the Chinese government plans to cap domestic steel production at 460 million tonnes, which would generate more than a 15% reduction in steel production for the remainder of this year.
Chinese steel producers have insisted upon a 40% cut in the contract iron ore price. However, various analysts suggest it may be difficult for China to secure beyond a 33% reduction given the volume of China's iron ore imports this year.
Mineweb is a web-based international mining publication focusing on mining financial and corporate news and comment.
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