China’s top steel maker the Baosteel Group is to head the Chinese side in the negotiations on iron ore prices for the 2010 long-term agreements with the world’s top three iron ore suppliers, BHP Billiton , Rio Tinto and Vale, according to local media reports.

The reports say the first round of negotiations may start at the end of December.

In the 2007 negotiations Baosteel achieved the first price agreement
that year with Vale of Brazil, only 9.5-percent up from the previous
year. Achieving the first agreement of the year was crucial, as it
prevented the levels of other international agreements pushing the
price up for China. This meant that in 2007, China’s steelworks
achieved record profits on the back of stable and relatively low
production costs.

According to the media reports, Ding Shouhu, general manager of
Baosteel’s raw materials purchasing department, who used to be the
chief negotiation representative of Baosteel, would probably be
replaced in the role.

Earlier, the CISA’s vice president, Luo Bingsheng, disclosed the two
sides had started preliminary talks on expectations of supply and
demand.

Insiders from the three suppliers have said the first round of negotiations will definitely have started by this Christmas.

Lei Xiping, secretary general of the China Metallurgical and Mining
Association, said recently at a steel industry conference that China
should try to reach the first price agreement in 2010, and that a
10-percent rise is both achievable and acceptable, the reports say.

Yang Siming, CEO of Nanjing Iron and Steel Company, expected the 2010
long-term agreement prices of iron ores would rise by between 5 and 10
percent. However, the ocean freight prices have increased by as much as
dozens of US dollars a metric ton (tonne), which could have a heavy
impact on steelworks’ production costs.

Baosteel Group is the parent company of Baosteel.

Source: Xinhua

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