Asian steelmakers want 40% cut in iron ore prices
Contract iron ore prices of $67 are possible
By Tom Stundza -- Purchasing, 3/20/2009 9:38:00 AM EDT
Major-tonnage Asian steelmakers have reiterated demands for a 40% reduction in contract prices for iron ore from Australian and South American suppliers in the fiscal-year contracts that set the pace for world ore pricing. And, according to various news reports, analysts also now generally see deep cuts this year.
The 40% price reduction, demanded by Chinese and Japanese firms, would be the biggest annual price fall in history and would end six years of consecutive price gains. Contract prices were $111/metric ton at the start of fiscal 2008-2009 so the demanded cutback would bring the 2009-2010 contract down to $67.
The world's top three iron ore miners--Brazil's Vale and Australia’s BHP Billiton and Rio Tinto--control two thirds of global seaborne trade of the steelmaking ingredient and are currently in talks with Asian steel firms over annual contract terms. A Reuters News report says negotiators face pressure to reach agreement before the new fiscal year starts in April, and the talks are set against a backdrop of global steel usage suffering its steepest decline since the end of World War Two.
China's steel sector, the largest in the world, produced nearly 40% of the global crude steel output in 2008 and consumes more than 50% of the global seaborne iron ore trade.
As reported earlier this month by Purchasing.com, a median estimate of eight analysts surveyed by Bloomberg News earlier found that contract iron ore Analysts at Goldman Sachs JBWere in Sydney, who have revised the fiscal 2009-2010 ore contract price forecast to a 40% drop from the previous 30% fall. Macquarie Bank in Sydney also revised its ore price forecasts to a cut of 35% from 30% reduction, and CLSA Asia-Pacific Markets in Hong Kong now expects prices to fall 30%, more than the 20% fall it was previously forecasting.prices could drop 30% this year as steel production has dropped in a variety of markets. Several analysts have now expanded the projected falloff.
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