Steel industry: Nippon Iron ore price Agreement 09

Investment points according to Rio Tinto's website released news: Nippon Steel and Rio Tinto have agreed on the 2009 iron ore benchmark price, specifically PB powder ore 97 cents/dry metric ton, YANDI powder ore 97 cents/dry metric ton, PB ore 112 cents/dry metric ton, compared with 2008, respectively, down 32.95% 32.95%; 44.47%; the outcome of the negotiations is basically in line with market expectations, from the end of the calendar year, steel prices are basically in the negotiation period of a higher level, in this period to reach an agreement, more conducive to the interests of ore enterprises. The analysis of the impact of the agreement price adjustment is as follows: Spot Price: We choose pb62% powder as the benchmark products, the implementation of the new terms fob price of 60.14 U.S. dollars/dry ton, shipping costs 12.6 USD/ton, the actual CIF tax price of 580 yuan/dry ton, in view of the market spot price basic wet ton quote, Combined with the port incidental rate after the conversion of PB powder ore 564 Yuan/wet ton, spot Australia ore price of 570 yuan/wet ton, the two basically flat, short-term will not obviously pull up the spot mine price; the cost of manufacturing enterprises: Since the first quarter of 09, most steel companies have reduced or ceased to implement negotiated ore prices, Long-contract contracts have become less binding on production enterprises than before.　　The adjustment of the various enterprises, we are at this stage of the implementation of the proportion of the single execution ratio of 0%, 20%, 50%, 80% sensitivity analysis, and the assumption that the Brazilian mine according to the 30% decline measurement, the actual enterprise ton of steel cost down 30-119 yuan/ton. The conclusion of the post-negotiation era: Since the original rules of iron ore negotiations have been under attack since last year, the introduction of this result does not mean the end of the negotiations. At present, China still insists on more than 40% of the decline, Brazil has not yet to comment on prices, there will be multiple declines in the future, but we can use this result as the bottom line of this year's iron ore negotiations, the decline in the contract of the iron ore long association contracts, Enterprises can freely in the agreement between the ore and spot ore purchase, the price of each other to divert. The future long iron ore price and spot price difference will be reduced; spot ore prices this year, the difficulty of rising, domestic mines by cost constraints, the future supply capacity will continue to decline, while the number of imported iron ore remains high.