September 18, 2008

China’s Steel Association Opposes Ore Price Increases

China's steel association opposes ore price increases

BEIJING, Sept. 17 (Xinhua) -- China Iron and Steel Association (CISA) wrote a letter to Brazil-based Companhia Vale do Rio Doce (CVRD) on Tuesday, asking the world's leading iron ore producer to give up its attempt to raise prices.

The letter said, "one-sided price raising not only violated international iron ore price negotiation rules, but also led to huge losses in Chinese steel enterprises. This damaged the win-win relationship in bilateral iron ore trading."

In February, the CVRD, Asia's largest steel producers and several European steel companies agreed on an ore price hike of 65 percent, which pushed up the ore price to 1.898 U.S. dollars per dry metric ton iron ore unit.

However, the CVRD informed steel enterprises last week it would raise the price of iron ore by an additional 20 percent as of Sept. 1.

"The previous price hike was motivated by Australian ore suppliers BHP Billiton in July. The CVRD aimed to follow BHP's move and drive up ore prices step by step," said Zhou Xiaoming, an analyst for the Lange Group.

Baosteel, China's largest steel supplier, had agreed with Australian ore producer BHP Billiton on a price increase of up to 96.5 percent for iron ore in 2008, nearly double that of 2007.

Iron ore prices already increased significantly this year bringing up business costs at the country's steel mills.

According to CISA statistics, costs for the country's large and medium-size iron and steel manufacturers rose by more than 250 billion yuan (36.5 U.S. billion dollars), or 57.57 percent, in the first half due.

"The VCRD should give up its decision to raise iron ore prices and come back to a normal price negotiation with China," said the CISA.

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