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Chinese iron ore prices back to 2007 levels

Chinese iron ore prices back to 2007 levels

Beijing: Iron ore miners have struck deals with Chinese steel mills to temporarily sell shipments at 40% discount to last year's term rates, aiming to secure volume even as the miners' biggest customer continues to demand a slash in prices. The arrangement lets mills pay 60% of last year's contract price from January 1, and settle the difference with the 2009-2010 term rate only after the benchmark price is set later this year, China Iron and Steel Association Secretary-General Shan Shanghua told Dow Jones Newswires. The official iron ore price negotiations continue for another month. ?However, the reported discount move effectively dials benchmark ore prices back to 2007 levels. ?"But the talks are not yet done," Shan said. "There will still be repayment of any outstanding amount when the rate is finalized and it doesn't mean they have accepted January 1 as the contract's official start date." ?The arrangement is a hint of what miners might be able to accept for a final term price, given its correlation to the spot market, analysts said. While Shan declined to elaborate on how far the world's top three miners - Companhia Vale do Rio Doce, Rio Tinto Plc and BHP Billiton Ltd  - have each implemented it, or on the progress of the price talks, most analysts said the move is now widespread, and in some cases have been in place as early as January 1. Vale is understood to be hanging out for a better deal, based in parts on lower freight rates. ?"From what I know, almost everyone involved has begun to do this," said Hu Kai, a steel analyst with metals consultancy and trading firm Umetal.com. ?"In the past, all benchmark rates have been crafted from spot rates," Hu said. "Now they're already using 2007 prices. I think it's very likely the price will eventually be a 40% cut from last year."  
The Chinese have consistently demanded the 2009-2010 term price be cut 30%-50% from last year's rate. [30/03/09]?

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