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2007 iron ore prices sought by Chinese mills - Shougang

Beijing: The annual tit-for-tat that is the iron ore price negotiations between Chinese mills and overseas mines is hotting up with the mills holding the whip hand for the first time in years.  Shougang Iron & Steel, China's sixth-largest steel maker, said on Wednesday Chinese steel mills would only accept global iron ore prices close to the 2007 level, which would give both miners and steel firms reasonable profit margins.
"I think, first of all, we can only go to discuss precise prices on the basis of the 2007 price level," Shougang Group Chairman Zhu Jimin told reporters.
That implies a 50 percent cut, since last year prices from top ore suppliers BHP Billiton, Rio Tinto and Vale almost doubled, according to Reuters.
"The price should give miners some profit room for their sustainable development, and it should also be in a range the steel mills can bear. A price that hurts the interest of one side will lead to disorder in the industry," he added.
China's steel sector, the world's biggest, has been hit hard by the global slowdown because demand for ships, cars and building work has fallen sharply.
Beijing is encouraging the fragmented sector to coalesce into a few regional champions, with upgraded plants in coastal regions where they have better access to overseas markets.
Although it has not offered direct aid to steel mills, it is offering indirect help through a 4 trillion yuan ($585 billion) stimulus package. And it is also urging companies to invest abroad while commodity and asset prices are low.
Chinese iron ore imports rose to 46.74 million tonnes in February, up 43.2 percent from the previous month and 22 percent higher year on year, according to the latest statistics from the General Administration of Customs (GAC).
China's steel industry is likely to see more consolidation in 2009 after the financial crisis threw it heavily into the red, a senior manager told Xinhua on Tuesday.
General manager of Jinan Iron and Steel Company, Li Changshun, said the industry will speed up structural readjustment to raise quality and eliminate obsolete factories.
The China Iron and Steel Association said 62 percent of its 71 large and medium-sized steel producers posted losses totaling 29.1 billion yuan (4.26 billion U.S. dollars) in 2008.
More mergers and acquisitions are expected, with smaller steel companies seeking shelter with stronger market players. [12/03/09]


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