China, the world’s largest iron ore consumer, needs to limit supplies of the material sold in the cash market as talks to settle contract prices stalled, Baoshan Iron & Steel Co said. The nation should reduce the number of its steelmakers to improve their bargaining powers with iron ore suppliers, Baoshan Steel President Ma Guoqiang said Monday in an online conference. Talks to settle prices with BHP Billiton, Rio Tinto Group and Vale SA are ongoing, Baoshan Vice President Chen Ying said.
The China Iron & Steel Association last month accused mining companies of encouraging “speculative” prices by increasing iron ore sales on the spot market. The association wants BHP, Rio and Vale to agree to a 35 per cent price cut on annual contracts, which it wants as a Chinese benchmark.
Shanghai-based Baoshan Steel will buy iron ore at provisional price levels should the talks not lead to an agreement by December 31, Chen said.
Rio Tinto, the world’s second-largest iron ore supplier, has offered a 33 percent price cut, which has been accepted by some Chinese customers as a provisional price until talks settle, Umetal Research Institute said in July. Fortescue Metals Group, Australia’s third-biggest ore supplier, agreed to a 35 per cent price cut with China this month.
Iron Ore talks
“Fortescue is a new iron ore supplier and its products account for a small portion of Baoshan’s needs,” Ma said.
State-owned Baosteel Group, the parent of Baoshan, will continue to follow the lead of the China Iron & Steel Association, Ma said. Baosteel was previously the main Chinese negotiator for iron ore price talks before the steel association took over for this year’s contract.
Baoshan has enough ore to meet its requirements from long-term contracts, Ma said.