Chinese look for 40% price cut

Chinese steel makers are expected to insist on a 40% cut to the price of iron ore during negotiations with Rio Tinto and BHP Billiton.

Chinese steel makers are expected to insist on a 40% cut to the price of iron ore during negotiations with Rio Tinto and BHP Billiton.

According to metals trade publication Platts, China’s domestic steel prices have dropped even below the 2007 level.

According to Platts, the Chinese, led by giant steel producer Baosteel, are also prepared to ask for a quarterly pricing mechanism backdated to January 1, 2009 instead of the originally planned April 1.

The iron ore pricing mechanism had previously been set at yearly reviews.

The Chinese have previously resisted such a quarterly pricing scheme, but analysts believe the renewed interest is the result of a sharp drop in spot prices to below benchmark prices.

Both Rio Tinto and Brazilian iron ore producer Vale late last year cut production by 10% in the face of falling demand.

BHP is yet to announce any production cuts.

BHP and Rio last year received an 85% price increase in iron ore, 20% higher than Vale due to reduced shipping costs of moving the ore from Australia to China.

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