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China to press mines for cut in iron ore prices

Baosteel steel
mill in China
Shanghai, China — MININGREVIEW.COM — 20 March 2009 – China – the world’s largest iron ore consumer – is to press mining companies to cut their benchmark iron ore prices to below 2007 levels, following the sharp decline in steel prices in recent months.
“Steel mills, led by Baosteel Group Corporation, would direct sales to iron ore producers that agreed to the price cuts,” China Iron and Steel Association secretary-general Shan Shanghua told reporters at a conference here.

Bloomberg News reports that Chinese steelmakers are pushing for the first iron ore price cut in seven years as the global recession crimps demand from carmakers and builders, resulting in losses for more than 60% of the mills in the country. A drop to 2007 price levels would mean about a 44% price cut for Australian benchmark ore.

“Iron ore prices should move closely with steel prices,” Shan said. “The basis for the talks this year should be 2007 levels – that means this year’s prices can’t be higher than that. If the prices fall, they should fall from 2007 levels.”

Benchmark steel prices in China have fallen back to last year’s November low, also the worst since 1994, according to a statement by Shan on the association’s Web site. China’s 71 biggest mills posted an aggregate loss of more than US$155 million (R1.6 billion) in January, and may extend losses in February and March, the group said.

“Steel prices are unlikely to recover significantly this year because of the recession,” association consultant Wu Xichun said at the same conference.

“Steel output in China, the largest producing nation, may post at least an 8% decline this year,” Shan said. “Output may be 460 million metric tonnes this year, which is the most optimistic forecast,” he added. Mills produced 500.5 million tonnes last year.