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China's mills are accepting new quarterly pricing system

Shanghai: China's smaller steel mills are buying iron ore at the quarterly prices agreed by Japan and South Korea, to the annoyance of the country's steel authority and killing any hope of survival for the old benchmark system.
The China Iron and Steel Association (CISA) has warned its members not to sign any agreements with big overseas ore suppliers until negotiations have been completed, but with talks deadlocked and spot price soarings, the association's pleas are being ignored as local mills try secure discounts as soon as possible, Reuters reported.
An official with a medium-sized mill in east China's Shandong province told Reuters that while his firm had not yet signed a formal contract, it was already importing foreign ore on terms similar to those agreed by Japan and South Korea.
"If we don't buy ore we have no choice but to stop production. We are buying ore on a batch-by-batch basis but the price is similar to the one already agreed," he said.
Last month, customers in Japan and South Korea agreed to buy ore in the second quarter using the new quarterly system, agreeing hikes of more than 90 percent from last year's contract.
While the China Economic Times newspaper cited an official with the Hebei Iron and Steel Group, the country's biggest steel producer, as saying that it had no choice but to accept the new quarterly pricing proposals, the bigger mills are still unlikely to publicly break ranks with CISA quite yet. [28/04/10]

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