Chinese leading steelmakers- Baosteel, Wuhan Iron and Steel and another Chinese steel mill, are in talks with the world's top three miners about 2010 iron ore benchmark prices.
As per a report, representatives of these three steel companies have gone to Singapore for interaction with the mining companies BHP Billiton, Rio Tinto and Vale. The report added that Chinese negotiators are pursuing price talks with miners despite the miners' preference for other Asian customers in South Korea and Japan to act as price setters -- a position previously enjoyed by Chinese mills.
"The talks have moved to Singapore and miners are taking a `take it or leave it' attitude when it comes to China," the report said, citing a senior steel industry analyst with research house Umetal, Hu Kai. Quoting an unnamed Chinese steel mill executive, the report said CISA's drive for a "unified" iron ore price is "now even more difficult to achieve".
The association has been pushing for a single iron ore price in China, eliminating volatility in spot prices. "This year's talks are likely to be like last year, with Korea and Japan taking the lead (in setting the benchmark price), and China then following," the executive told China Times.

Chinese steel major Baosteel Iron and Steel Co raised March prices for major products by as much as 7.4 percent in response to higher demand and rising costs as well as to recoup some losses when it unexpectedly suspended price increases in February.
Hot rolled coil for March delivery increased by USD 44 a ton, or 7.4 percent from February, while prices for cold-rolled products also rose 300 yuan, or 5.4 percent, Baosteel said. “The increases are within analyst expectations, given the recent industry wide margin squeeze caused by a fall in spot steel prices since early January and rising coke and spot iron ore prices,” said Gao Hua Securities, Goldman Sachs' China partner.
Quoting an analyst of research firm UC361.com, the report said demand from automotive and home appliance makers has been strong for Baosteel's cold-rolled products, thanks to government stimulus measures.
Baosteel had unexpectedly kept February prices unchanged for most products amid speculation the steel mill did that to strengthen China's position in annual negotiations over term iron ore prices with foreign miners. With the March increases, the company is moving to catch up with other major mills which had raised February prices as the market is more certain now that term ore prices will climb.
"Baosteel has to take into account cost issues as the company highly relies on imported ore," Hu said. On behalf of Chinese steel makers, Baosteel's state parent is negotiating annual term ore prices with Anglo-Australian miners Rio Tinto and BHP Billiton as well as Brazil's Vale.
China's five largest mills have proposed to one of the top three ore suppliers that they pay a provisional 40 percent more for contract ore, according to a Platts newsletter. A hefty 40 percent jump would see Australian ore prices return to close to the pre-financial crisis record in 2008.
Customs data showed this week that China's iron ore imports fell 25 percent to 46.6 million tons in January from December's near record high of 62.1 million tons.

The average price of imported iron ore was USD 79.8 per tonne in 2009, down by 42 percent YoY and the value of imported iron ore was USD 50.51 billion in total last year, revealed statistics released by the General Administration of Customs
China imported 627.78 million tons of iron ore last year, 41.6 percent more than the 443.45 million tons it imported in 2008, due to increasing demand for the mineral.
An unnamed source who participated in the talks said China steel mills, led by Baosteel Group Corp have started talks on 2010 contract iron ore prices with the big three global miners, Rio Tinto Ltd, BHP Billiton Ltd and Vale SA. They are expected to reach an agreement by April 1st.

China, the world's largest steelmaker and consumer, is set to double its steel production by 2025, said Marius Kloppers, Managing Director, BHP Billiton.
The world largest mining company managing director also said that he's optimistic about commodity prices, especially for iron ore and coking coal.
Kloppers says his company started analysing Chinese supply and demand some 18 months ago, and found it looked positive for Australian exports. "So we did a bottom-up analysis. How many buildings, what is the steel intensity and so on," he says.
“We think that this trend is going to go on for the 20 years that we've forecast."

Chinese steel product prices rose steadily for around two months from October 2009 and the price of imported iron ore increased accordingly. According to a report, the average reference CIF price for iron ore jumped from less than CNY 700 per ton to over CNY 1,000 per ton during the period while the average reference CIF price for Indian iron ore grading 63.5 percent hit a high of USD 135 per ton.
As a result, a number of international research institutes modified their original forecasts that the 2010 long-term contracted iron ore benchmark price, between the three iron ore giants and Chinese steel mills, would rise by more than 20 percent from the 2009 price agreed with Japanese steel mills.
Goldman Sachs estimated that the benchmark price would grow by 35 percent. Merrill Lynch also raised its forecast to 50 percent. However, the uptrend did not last and steel product prices started to slide from late January 2010 due to large stockpiles. As a result, the falling steel product prices brought down the spot Indian iron ore price which stands at less than USD 130 per ton at present, still higher than the price of domestically produced iron ore.
Chinese steel mills, especially private enterprises, are suffering from increasing production costs, which is likely to lead to a drop in imported iron ore prices in the near future. Both Merrill Lynch and United Bank of Switzerland expect that China's crude steel output and price will rise in the first half of 2010. If the long term contracted iron ore price rises by between 35 percent and 50 percent and steel product prices continue to slide, many domestic steel mills may face difficulties.
In 2009, several emerging markets such as China experienced relatively high economic growth and strong steel product demand, while other parts of the world struggled with the economic slump. Crude steel output from the European Union decreased by 29.7%YoY while the United States and Japan witnessed a 36.4 percent and a 25% drop respectively on an annual basis.
Although the global crude steel output recovered rapidly in the Q4 of 2009, this was not driven by market fundamentals, but by purchases to replace and supplement stockpiles. The European Union expects that its crude steel output will return to pre-crisis levels by the Q2 of this year. However, it is generally believed this will not occur until the third or Q4.