CISA to discuss current iron ore negotiations Chinese model

Rizhao Port loading and unloading company's vehicles are loading and unloading imported iron ore.　　Xinhua News Agency (Information photo) reporter Forest Beijing reported that the 200-year board of Directors of China Iron and Steel Industry Association (enlarged) meeting is scheduled to be held on February 4, the industry called "closed-door meeting" of the president meetings will also be held in the afternoon of 4th, in accordance with the usual practice, iron ore negotiations will What will be on the table?　　It is certain that, in all sorts of speculations, in the face of the lack of progress in the iron ore negotiations and the obstacles set by the big Three, in the case of high demand for iron ore, the "Chinese model" and "China Price" announced by CISA in the early stages of the negotiations have come to an important juncture of adjustment and change.　　Focus on the 1 pressure: The big three tricks in front of the Chinese side is the lack of progress in the iron ore negotiations and the three major obstacles set up by the Giants.　　Although it is not possible to provide more details, an insider close to the iron ore negotiations admitted in an interview with the economic reference newspaper that the iron ore negotiations had begun and Baosteel had been negotiating with Rio Tinto and BHP Billiton, but the situation was not optimistic and the negotiations were progressing very slowly. These people said that China's steel market demand in a steady growth process, the demand for iron ore is also increasing, the Chinese side of the bargain space is very small, the two sides of the negotiation gap is very large. More importantly, in 2008, when spot iron ore prices plunged, Chinese steel mills take the market downturn as the basis, postpone or even cancel the long association mine that should be carried out, instead of buying a lot of low price ore in the spot market, this kind of dishonest practice has made the mine very annoyed, plus the Chinese side did not accept the so-called "　　Japan and South Korea start Price ", the three mines are not keen to negotiate with China. More than that, the big three are at different times, at the same time, "not in a hurry to negotiate" on different occasions, but also in a step-by-step to achieve their own "China Plan": first, by a large number of chartering to create the illusion of maritime tension, thereby pulling up the sea freight costs, while reducing the spot mine to pull high spot ore prices,　　Then began to reduce the number of long-term supply, and to some steel mills customers to reduce the demand for the long-term supply of the next year, to take this opportunity to create iron ore fear of steel mills, further pull the spot price, until recently again two Billiton to abandon China to the negotiations with Japan and South Korea.　　"Economic reference newspaper" from a veteran personage confirmed that the two Billiton and Nippon Steel Negotiations are underway, progress is relatively smooth, but the price range is still under discussion, and did not finalize. But that does not mean the three mines are abandoning the Chinese market. The above people said that, from the actual situation last year, although the Chinese and the three mines did not reach a long-term agreement, but in fact the various steel mills and the three major mines of the long association has not stalled, up to now, the three major mines still provide steel mills with ore,　　It also suggests that there is only one behind the strong bargaining power of the big Three: increasing bargaining chips for higher iron ore prices. Xiangchun, my steel network consulting director, said with concern thatThe three mines will continue to influence the iron ore market and prices through various means to create a more solid foundation for price increases. Focus on the 2 status quo "China model" fear of the beginning of negotiations, China Steel Association Secretary-General Shan at a meeting in Qingdao announced the target of this year's import of iron ore Association, with China's fiscal year as the contract period (January 1, the implementation of the new annual price), bulk concessions, a large amount of discount should be more; China does not "blindly follow up" The outcome of the negotiations of other countries.　　These four goals are seen as core elements of the "China model" of iron ore negotiations. "In practice, the Chinese model is very difficult to implement," he said. Dai, vice president of Shougang Institute, said in an interview with the economic reference newspaper. First, he says, if the annual price is to be implemented from January 1, the result is necessarily an advance price hike, which will terminate the relative low price already in execution three months ahead of schedule. For the Chinese steel mills, it means more cost.　　In addition, if according to the current market situation analysis, the steel market warmer, steel mills can not decline also means that the demand for iron ore is rigid, in the case of steel dispersed, the demand for the big three mines to become the price of the favorable chips, it is difficult to ask for more concessions. Dai told reporters that in the case of China's negotiations at a disadvantage, the requirements of the three major Giants signed a long contract can no longer sell spot ore requirements is not realistic. On the one hand, the long-term contract outside the ore sales, is not in the long association of the supply Agreement, the above requirements is tantamount to a change of the long association supply contract.　　In addition, the Chinese market has a long concord spot ore price difference, which is also the three mines to manipulate the Chinese market, and the opportunity to obtain excessive profits of the important way, of course, will not easily give up. A senior executive at a state-run steel plant told the economic reference newspaper that although the steel mills are currently settling for temporary prices with Japanese and Korean prices, there are still many variables. Because the price did not negotiate, the current iron ore market bullish mentality is very heavy, some traders and domestic mines have begun to hoard goods reluctant, the market on the spot supply is very tight. Once the three mines again reduce the supply of long, steel mills must go to the spot market to purchase ore, not only the cost changes are very large, production and operation is also very unfavorable. The sooner the long association negotiations are over, the better for our mills.　　Said the personage frankly. Focus on 3 guesses: Negotiating strategies need to be flexible. Although it is not possible to obtain the exact information about the meeting in advance, some insiders say the discussion will certainly involve the iron ore negotiation strategy, as well as the "Chinese model" and "Chinese price" previously announced.　　Dai told reporters, "China model" if only as the Chinese bid conditions, can be negotiated, can be changed, but if it is as an immutable bottom line, it will inevitably be very detrimental to China's actual negotiations. On the one hand, from the current situation, in the last year, the long association negotiation price undecided, also means that the Chinese side did not and the three major mine negotiations of the basic prices, coupled with the Chinese spot market price has risen to 130 U.S. dollars/ton, the three mines have been used as an important reference to negotiate, it is difficult for China to get preferential prices.　　Under such circumstances, if the so-called "China model" is excessively adhered to, it may lead to a stalemate in the negotiations. On the other hand, at present, China's iron and steel enterprises operating rate is very high, this year, the crude steel production has been nearly 5 700 million tons, and next year's demand will remain stable, in such cases, to the price of raw materials demand for psychological preparation. In contrast, Japan and South Korea, Europe and the United States and the steel market is far less than China, is still in recovery, especially the four quarter of Japan's Nippon Iron Production earnings show, four quarter of the 8.72 million tons of ferrous metal output, sales of 5, 700 million U.S. dollars, year-on-year decline of 35.1%. "From this level, the market pressure of Nippon Steel is bigger than ours, the requirement of keeping low cost is stronger than ours."　　Dai told reporters. Dai that this time can be appropriate to dilute the "first price", take a wait-and-see or directly with Japan, South Korea and Europe and other steel enterprises to communicate, and to complete the negotiations as soon as possible, after the results come out, that can be accepted at any time to follow. On the other hand, steel mills can also take the initiative to use their own as a major customer identity and with the three major mines between the good relations of cooperation, through the year-end settlement discount and other flexible means to achieve "large amount of concessions" purpose.　　In addition, steel mills should choose the opportunity to lock some marine COA (long term Charter contracts) at a lower price when the shipping fee is appropriate. In an interview with the economic reference newspaper, Xiangchun said that, in addition to not revealing the price bottom line, this year's negotiations to choose a more flexible way, it is noteworthy that, because China and Nippon Steel are mainly imported ore varieties are "powder ore" and "lump ore", Nippon Steel talks about the "initial price" is likely to be a low block ore, Ore rose high , which is bad for China. Therefore, it should not be "followed by no negotiation".　　Can be based on the current steel prices and iron ore prices down the opportunity to create conditions to take the initiative to find more breakthroughs and negotiation opportunities. Focus on 4 Rumors: Two extension of the bottom line 40% Recent media sources said Rio Tinto and Japan and South Korea completed the first round of negotiations, the former demand 2010 iron ore Association in 2009 on the basis of the price of 40%.　　"Economic reference newspaper" immediately confirmed to the people concerned, this is only Rio's price, prices are not finalized, there is the possibility of bargaining.　　According to reliable sources, the current negotiations between Rio Tinto and Japan and South Korea more smoothly, at the beginning of the iron ore negotiations this year, the Japanese and Korean steel companies have agreed with the trend of iron ore prices, the two sides of the game lies in price increases. In addition, BHP Billiton recently "repeated the same old," said efforts to promote index pricing, trying to link the annual contract with the spot market trend.　　But analysts said that, in addition to China's resolute opposition, the BHP Billiton index pricing is not feasible in the short term, because the attitude of Vale and Rio Tinto is still biased towards maintaining the long association. It is understood that, because the determination of China's iron ore demand will continue to rise in 2010 years, the three major mines have started a partial expansion of production projects.　　BHP Billiton, the world's biggest mining giant, has recently approved an expansion plan of as much as $1.93 billion trillion.According to the latest report of China's Metallurgical Industry Planning Institute, 2010 China's iron and steel situation analysis and forecast, the 2010 domestic steel production capacity will continue to increase. 2009, China's steel production capacity of about 700 million tons, a record high.