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Baosteel will resume ore negotiations

Baosteel will resume ore negotiations

Beijing: China will abandon its disastrous experiment of putting the China Iron & Steel Association in charge of iron ore price negotiations this year, the Australian newspaper reports.
The nation's biggest steelmaker, Baosteel, will be brought back to its traditional role in the frontline of the next round of discussions in December.
The often aggressive stance by CISA, which was brought in by the government to lead the discussion for the first time this year, has led to record stockpiles of iron ore and a soaring spot price that now stands at more than $US100 per tonne. China Business News yesterday quoted CISA chief Shan Shanghua as saying that Baosteel would lead talks with foreign miners to set next year's price in December.
CISA is expected to stay in the background and retain an organising role.
Its poor performance has cast a cloud over the future of Mr Shan.
One illustration of CISA's failure is the fact that the spot price is 50 per cent more than the price agreed to by Japanese and South Korean steel mills in May, which represented a 33 per cent reduction on last year's record prices.
CISA rejected the Japanese/Korean price, continuing to push for a price cuts of between 40-45 per cent, although it indicated a willingness to negotiate a smaller reduction in July.
The big iron ore producers, led by Rio Tinto, have refused to budge, with their position bolstered by surging spot prices as demand for both iron ore and steel in China and other parts of Asia begins to rebound from its lows earlier this year.
CISA has ensured that the days of annual contract negotiations are over, with six months the latest timeframe set in a cut-price deal with Fortescue Metals Group this week, in which Baosteel was heavily involved.
FMG chief Andrew Forrest predicted that the market would eventually move to a uniform index price. BHP Billiton has long wanted a quarterly index-based pricing arrangement.  [20/08/09]


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