Brazil’s Vale do Rio Doce negotiates iron ore price with Chinese steel makers

7 December 2006

Shanghai, China, 07 Dec – Brazilian mining giant Companhia do Vale do Rio Doce (CVRD) has begun negotiating with Chinese steelmakers on the price of iron ore for 2007, company sources said in Shanghai Thursday.

CVRD, the world’s largest producer of iron ore which in 2005 sold 22.4 percent of its total production to China, the company’s biggest market, has already begun negotiating with Baosteel, China’s largest steel manufacturer.

Speaking to official Chinese news agency, New China, the deputy secretary-general of the Chinese Iron and Steel Association, Qi Xiandong, said that the price of the raw material would undergo “slight alterations,” with the news agency predicting an increase of between 5 and 10 percent.

The Chinese steelmaking industry, which represents around a third of world production and consumption, wants to have a greater influence on setting world iron ore prices, with state Chinese steelmakers trying to set up a cartel to negotiate prices of raw materials with foreign suppliers.

The latest negotiations in 2006 set Chinese steel producers – which represent 43 percent of world production and proposed a maximum 10 percent increase – against mining companies, CVRD, BHP Billiton, and Rio Tinto, which are responsible for mining 75 percent of the world’s iron ore.

The Chinese producers were forced o accept price rises of 19 percent in 2006, after a 71.5 percent jump in 2005.

The Iron and Steel Association said that Chinese steelmaking grew at a slower rate in 2006, which could lead to lower production increases in 2007.

The Chinese government also decided in November to impose a 100 million-ton reduction in national iron and steel production to modernize production technologies, which according to the industry’s association would lower Chinese demand for iron ore.

Iron ore is, after soy, Brazil’s biggest export to China, via CVRD which, in the first nine months of 2006, sold 20.438 billion tons of iron ore and pellets, or 28.1 percent of the company’s total sales for the period. (macauhub)