Steel mills feel the heat in ore talks as output peaks
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Crude steel production in China, the world's largest steel maker, rose 14 percent to a record last year, further complicating this year's iron ore negotiations.
Steel output rose to 568 million tons in 2009 from 500 million tons in 2008, the National Bureau of Statistics said in a statement yesterday.
The output surge has also fueled demand for raw materials. This would further strengthen the hands of the three big miners in this year's iron ore negotiations, said Hu Kai, an analyst with consulting firm Umetals.
The big miners - Rio, BHP and Vale - have so far not held any major negotiations with the Chinese side, led by Baosteel, said industry sources.
In contrast, Australian miners have already held talks with Japanese steel mills for the first round, and decided to set contract prices at 2008 levels, said people familiar with the matter.
Global miners have sidelined China, their biggest customer, in the annual iron ore price negotiations and do not plan to travel to the country for talks, instead choosing Singapore as the meeting venue, said reports in the Financial Times.
The big miners already have an advantage in the negotiations as the spot prices of iron ore surged last week to a record high of $135 per ton, driven by strong demand from the steel market.
Traditionally, annual contracts are settled at levels below the spot market prices. Last year's benchmark contract for iron ore was fixed at $60.4 a ton, excluding freight charges.
