Iron ore giants are harder to press for Chinese steelmakers to cut prices by 40%

Rio Tinto and Japan and South Korea signed a 33% cut in price, Vale is down only 28.2%, China's steel companies to reduce the target of 40% more difficult iron ore giants step-by-step press CISA Positive response-our correspondent Ma Hongyu recently, Vale, one of the world's three big iron ore giants, announced that the world's largest steel manufacturing company India's Ansai-Mittal has accepted Vale's 2009-year iron Ore association with Japan and South Korean steel companies.　　Vale's price is higher, down only 28.2%, compared with the 33% per cent cut by Rio Tinto and Japanese and Korean companies.　　This will undoubtedly make the ongoing negotiations with the three big iron ore giants, the Chinese steel companies to achieve iron ore price reduction of 40% target more difficult.　　CISA's attitude remains Tubiang, Shan, secretary general of China's Iron and steel Industry Association, said the Chinese steel companies will not budge in the iron ore negotiations and China's stance has never changed.　　June 9, the China Iron and Steel Industry Association on its official website published a statement entitled "China Iron and Steel Industry Association against the ' two Billiton ' joint venture and international iron ore trade Monopoly Declaration", proposed a ban on speculation in the import of iron ore. "This is a positive step for CISA to maintain the right to negotiate."　　National Securities steel industry analyst Lo Rongjin said. In recent years, in negotiations with the international iron ore giants, CISA has repeatedly failed to fight, which may have a lot to do with the membership of CISA. "The member units of CISA are the large state-owned steel companies represented by Baosteel and Angang, and many of the domestic private steel enterprises are not member units, but they have occupied about 35% of the domestic market share, these enterprises are the three major iron ore giants to strive for the breakthrough."　　Lo Rongjin points out. May by the recovery of steel prices, the promotion of domestic iron ore prices have increased consumption, at the same time, some of the early production of the mine has also begun to restore output.　　At the same time, Qingdao Port, Beilun port of the spot ore prices than April also apparent rise.　　With the collapse of the Asian camp, the "two Billiton" joint, the Chinese small steel mills pouring private iron ore contract, with Baosteel led by the large steel companies to raise the ex-factory price, which has increased the pressure on CISA negotiations. The capacity of the world's ore is concentrated in the hands of Vale, Rio Tinto, BHP Billiton and other "Big three", in contrast, the distribution of China's steel production capacity is dispersed, the iron and steel industry concentration is too low, the proportion of low-end capacity is too large to restrict our negotiating power is very low concentration,　　It is difficult to really focus on the large proportion of the industry demand and the highly oligopoly of the ore manufacturers to negotiate; the proportion of low-end capacity is too large, but also in the disruption of the overall demand structure at the same time, more because of the ore comprehensive utilization rate, poor efficiency, drag the entire industry to resist cost disturbances of The bottom line for CISA's talks has not changed, despite the looming deadline for the June 30 negotiations.　　Most of the industry insiders said the iron ore negotiations are not likely to completely break down. "Even accepting a 33% per cent reduction does not mean that China talksThe overall failure of the contractor.　　"CISA is working to get additional conditions," said Zhou Xizhan, chief analyst at Citic Securities steel industry. For now, China hopes to sign an agreement on a quarterly basis.　　If this additional condition is achieved, the future iron ore prices will continue to fall, Chinese steel companies can get some leeway. "China's steel is strongly opposed to 33% of the first price, not only because of the" lowest 40% "with China's psychological price is not small gap, more importantly, this shows a gesture, will be for next year's iron ore negotiations to win a strong chip.　　Zhou Xizhan stressed. In fact, at the beginning of the iron ore negotiations in 2009, the Steel Association made it clear that only a single long-term agreement was used to import prices. It is also the frustration of CISA to propose additional conditions for quarterly pricing.　　Clearly, quarterly pricing would be good for China if subsequent prices continued to fall, but China would suffer higher cost pressures once iron ore prices rose rapidly. "If the long-term agreement is not negotiated and turned into a spot supply, it will likely attract complex financial speculation such as futures derivatives."　　Lo Rongjin expressed concern. June 11, Baosteel Group, which represents China's iron ore negotiations, began announcing an increase in the prices of July products after a three-month cut in prices. Zhou Xizhan that "the future steel market for prices have a certain supporting factors, iron ore price of 33% decline also become acceptable, with the 4 trillion investment effect of the growing demand for domestic steel growth, the Chinese steel companies are expected this year will be profitable." ”