Last Updated :
17 October 2009 at 20:30 IST
China’s iron ore imports up by 36%
BEIJING (Commodity Online): China’s iron ore imports rose 36 per cent to 469.4 million tonnes in the first nine months from a year earlier.
The debate over the next year’s iron ore benchmark prices has got off to an acrimonious start with China seeking to separate its negotiations from other countries while global giant miners refuse to budge downwards on prices.
China Iron and Steel Association (CISA) said iron ore contracts should run for a calendar year instead of beginning on April 1.
The iron ore conference is usually regarded as the unofficial start of benchmark price negotiations for the next contract year.
There may be another failure in agreeing a benchmark price next year, as happened this year, if CISA sticks to its position.
BHP prefers to use spot prices, which are market-oriented and index-linked. If both sides are not happy with the benchmark price negotiation, the next year ore trading might again be based on spot rates.
Iron ore is the only commodity that is negotiated with a benchmark price system. Other commodities such as copper and oil are linked to an index.
This year’s iron ore price negotiations became deadlocked in June when China insisted on a 45 per cent discount on 2008-09 prices after a 33 per cent cut in benchmark iron ore prices had been set with other Asia steel mills.
Chinese steel mills would not be able to make money at the current price that iron ore producers are demanding because an oversupply is causing steel prices to fall sharply.
Chinese iron ore imports rose 36 per cent to 469.4 million tonnes in the first nine months from a year earlier. Shipments have exceeded real demand by 50 million tonnes.
But mining executives from iron ore producers said the iron ore price was driven by demand, even if the demand side suffers lower profits. As long as the demand is there, there will always be possibility of rising prices.
Miners are optimistic because the economic recovery is leading to increased demand for steel.
Samarco Mineracao, an iron ore pellet joint venture between miners BHP Billiton and Vale, expects to produce at full capacity next year as demand recovers.
However, some Chinese steel mills are not optimistic about next year’s steel demand. China’s steel industry may end up losing money next year as oversupply weighs on prices. That might force steel companies to cut production next year.
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