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Steel mills face huge pressure

RISING prices of imported iron ore as well as other higher costs could put "huge pressure" on domestic steel makers and lead to higher steel prices this year, said China's steel industry association.

The domestic industry, already plagued by oversupply and weak prices, is also set to suffer from costlier coal, coking, electricity, water and transport charges in 2010, the China Iron and Steel Association, which represents major mills, said in a regular review released yesterday.

"In the next stage the import prices for iron ore may rise, which will put upward pressure on domestic ore prices," CISA said.

It also forecasts a change in demand for different steel products. In 2009, long products, used for construction, were favored as China invested in a large number of new projects amid a government stimulus spending.

This year, demand for steel plates, used for manufacturing, could outperform as many projects are beginning to bring in equipment and the government starts to curb investments on new construction projects.

CISA, which last year failed to reach a price agreement with global ore miners, handed over the role as chief negotiator back to Baosteel Group Corp in 2010. In a press briefing in Beijing yesterday, CISA's vice chairman, Luo Bingsheng, said this year's talks had started but he gave few details on its progress.

Some media reports said Australian miners were asking Japanese and South Korean steel customers to agree to a 40 percent hike, while China is expecting a 20 to 30 percent rise. The talks failed last year as Rio Tinto, BHP Billiton and Vale rejected CISA's demand for a cut bigger than the 33 percent offered.

China's iron ore imports surged 42 percent to a record 628 million tons last year.


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