Pingxiang Iron & Steel, a privately owned Chinese steel maker, said it was buying iron ore at discounts of as much as 46 per cent because of an oversupply due to slumping demand.
The Jiangxi province-based mill secured long-term contracts for 6.5 million tonnes of ore this year, Vice-President Tu Juan said on Wednesday in an interview in Shanghai, without specifying which producers gave the discounts. Iron ore producers were offering prices cheaper by 20-46 per cent cheaper than 2008 levels until benchmark prices were settled, she said.
Cia Vale do Rio Doce, the world's largest iron ore producer, and rivals are forced to offer discounts after Chinese steel makers refused to buy the material at record 2008 prices. Chinese steel makers are trying to cut raw material costs after posting first-quarter losses because of the global recession.
"We are taking some losses in the short term for the ore bought at a 20 per cent discount because spot prices are lower," Tu said.
"But we will benefit in the longer term because we are securing long-term contracts from major producers which we didn't have previously," she said.
The company buys iron ore from producers including Vale, London-based Rio Tinto Group, Brazil's Cia Siderurgica Nacional SA and South Africa's Kumba Iron Ore, Tu said.
