Domestic

Baosteel to quietly give in to Q3 ore price hikes - official

(Agencies)
Updated: 2010-06-19 09:37

Leading Chinese steel mill Baosteel has not formally agreed a price for iron ore in the third quarter but may have to swallow whatever the big miners offer, a company official said on Friday.

On condition of anonymity, the official told Reuters the company was highly unlikely to officially agree to any price increase, but in reality faced little choice but swallow it on a "temporary basis" to ensure its furnaces run smoothly.

While China still insists that ore price negotiations with Vale, Rio Tinto and BHP Billiton are continuing, its mills have won permission to agree "interim" deals, the China Iron and Steel Association said earlier this year.

The Baosteel official, who has participated in the company's internal discussions about iron ore prices, said it was still unclear what prices would be in the third quarter, with the three big suppliers proposing hikes ranging from 20 percent to 30 percent, all based on the Platts iron ore index.

Related readings:  BHP Billiton may renew iron-ore price push  Steel price down despite iron ore price hike  Vale to bump ore prices up in Q3 Baosteel still in merger talks with Baogang  Baosteel merger talks with Baotou Steel collapse  Baosteel scales back expansion target

On Thursday, Chen Ying, the vice-president of Baosteel, poured cold water on media reports suggesting the company had already agreed a 23 percent price hike for the July-September period.

"I've certainly not heard this sort of information that Baosteel has already accepted an iron ore price hike of 23 percent," she was quoted as saying.

Earlier this year, the three mining giants replaced the cumbersome annual benchmark system with a new index-based mechanism, and said prices for each quarter would now be based on the average spot market price during the previous quarter.

However, another market source said given iron ore prices in March, April and May, a period preferred by at least one of the big miners as the foundation for third quarter prices, Chinese mills were likely to pay closer to $156 for standard 62 percent iron ore fines.

When contacted by Reuters, Hu said he had no direct knowledge that Baosteel would accept the hike, but added that he expected the company to stick to agreed quarterly pricing rules.