Chinese
steel mills are prepared to demand the introduction of quarterly
pricing as well as a 40 per cent iron ore price cut as part of their
bargaining during benchmark pricing negotiations with the three major
iron ore producers: Rio Tinto, Vale and BHP Billiton, according to a
report in The Melbourne Age.
"The demand for a drop of 40
per cent (in 2009 benchmark prices) is not unreasonable as China's
domestic steel prices have dropped even below the 2007 level," a
Beijing analyst told Platts, a metals trade publication.
The
Melbourne Age understands at least one large iron ore miner is
privately expecting a 30 per cent fall in the benchmark price.
Australian ore miners received an 85 per cent increase in the iron ore
price last year.
Vale and Rio Tinto, the world's two largest
iron ore miners, have slashed production by 10 per cent since November
in response to a lack of demand. BHP has not announced any production
cuts, but it has been selling a large amount of its ore on the spot
market at prices well below the benchmark price.
In a move that
could bolster BHP's attempt to switch iron ore pricing to an indexed
system rather than a benchmark price, Platts said China's Baosteel was
seeking a quarterly pricing mechanism. Benchmark prices take effect on
April 1, but Baosteel is apparently seeking to institute the quarterly
system from this month.
