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Mills and ore miners fail to reach deal

CHINESE steel mills and global iron ore miners failed to reach an agreement yesterday when a deadline for the annual price talks expired.

But industry officials hinted that the talks could drag on, and Rio Tinto, one of the top three iron ore groups, said some contracts may revert to the more volatile spot market pricing.

"So we still expect a conclusion. That's from the perspective of each side," said Tian Zhiping, vice general manager of Hebei Iron and Steel Group, a major mill based in Hebei Province.

The China Iron and Steel Association, which is leading Chinese mills in this year's price talks, has rejected a 33-percent price cut accepted by Japanese and South Korean mills for Rio's key Australian ore as it held out for a reduction of at least 40 percent.

"We don't see the CISA changing its stance so far, but our business is busy as demand is quite good now," said a senior China-based source for one of the global miners. "A likely scenario is that there is no agreement between the CISA and miners, but deliveries will continue."

Industry sources said domestic mills are now paying for ore in several flexible ways. Some are following the one-third cut accepted by Japan and South Korea, while others are paying 60 percent or 80 percent of last year's term prices as prepayment, or directly paying spot rates.

Spot ore prices for China gained 20 percent since Rio settled deals with Japanese steel mills on May 26, to levels similar to the new term prices accepted by Japan and South Korea.

"It would be very difficult for the CISA to soften its stance, but the reality is mills are doing deals themselves," said an analyst.


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