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Chinese steel mills want lower ore prices

CHINESE steel makers, the largest buyers of iron ore, want Cia Vale do Rio Doce, BHP Billiton Ltd and Rio Tinto Group to cut prices of the material by between 40 percent and 50 percent this year, Liaoning Province-based Anshan Iron and Steel Group said.

"The 40 to 50 percent cut is a consensus reached by both domestic and international steel makers," Anshan President Zhang Xiaogang said in a Bloomberg News interview yesterday in Beijing where he's attending meetings of the National People's Congress. "I think it's reachable."

Chinese steel makers are pressing for the first iron ore price cut in seven years as the global recession crimped demand from car makers and builders, resulting in losses for more than 60 percent of the mills in the country. Annual price talks are taking place between mining companies and mills.

"We don't have excessive iron ore stockpiles," Zhang said. "We are waiting for the negotiation results. We had a profit in the first two months. But it's very small."

Vale, BHP and Rio account for about three-quarters of seaborne trade in iron ore. China buys about half of the shipped material.

Contract prices may fall "between 15 and 20 percent," said James Wilson, a resources analyst at DJ Carmichael & Co. "There is a lot of game playing going on. If they settled at today's (yesterday) spot price that would be about a 14 percent decline."

BHP Billiton and Rio Tinto, the world's largest and third-biggest mining companies, have offered Chinese customers price discounts to keep buying iron ore, said Shougang Corp's Chairman Zhu Jimin. Mills have cut back on purchases and are using inventories rather than buying discounted material, he said.

The two iron ore producers have offered to sell the material at spot prices, which are lower than benchmark contracted prices, until new benchmarks for the year are decided, he said. Shougang is China's eighth-largest mill.

India's iron-ore exports will slump this month because of reduced Chinese purchases, the Federation of Indian Mineral Industries said on Wednesday.

Prices of Indian iron ore, sold on the spot market, have fallen by US$15 a ton from US$85 a ton last month, the federation said. Benchmark Australian prices are hovering about US$91.


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