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Vale abandons iron ore price increase

Vale abandons iron ore price increase

Shanghai: Slowing demand has led leading iron ore supplier Vale to withdraw its demand for a 12% price increase from Chinese steelmakers, writes Bloomberg. "They have pulled back the proposal," confirmed Xu Lejiang, chairman of Baosteel Group - a Vale customer. Speaking in an interview with the newswire, he stated that the Brazilian company had said asking for higher prices for the steelmaking raw material "was bad timing when the global steel industry is in the throes of a downturn."

Vale, which raised prices by 71% earlier this year, was pushing for a further 12% increase as early as July. Last week it announced that it intends to cut its output to cope with the reduced demand.

The global economic slowdown since June has curbed demand for steel, damped prices and turned Chinese steel mills unprofitable in October, the China Iron & Steel Association said. The country's steel consumption may drop below 489m metric tons this year, which was last year's production level, creating a "serious imbalance in demand and supply," Xu is quoted as having said earlier at a conference. "It's very tough for Chinese steelmills when steel prices dives but raw material costs such as iron ore and coking coal were at records."

He added that the Chinese "steel industry will face a possible whole industry deficit in the fourth quarter" and stated that the slowdown may represent an opportunity for bigger steel companies to buy rivals.  [04/11/08]