Baosteel Moves Towards Short-term Prices for Imports

Talks on older long-term prices for iron ore imports have stalled.

Baoshan Iron and Steel, part of Shanghai Baosteel Group, has begun paying short-term prices for iron ore imports as talks on an older long-term price regime stall, executives said on May 5.

The China Iron and Steel Association (CISA) had earlier urged steel makers to stop buying ore from Brazil's Vale and Australia's Rio and BHP in protest at an alleged price monopoly after the miners said they had abandoned annual contracts in favor of short-term pricing.

"The 2010 iron ore negotiations are still ongoing and steel makers around the world are importing iron ore based on a temporary price basis," Baoshan general manager Ma Guoqiang said at a briefing.

China is the world's largest importer of iron ore and the CISA wants to maintain long-term pricing to avoid large fluctuations.

Ma said a quarterly system would affect the company's product pricing, inventory management and costs control, but admitted: "Changes to the system is a general trend."

"To address these changes, the company is conducting research into the impact of different pricing mechanisms on the company's operations and countermeasures to be taken."

Board secretary Chen Ying told the briefing that the firm "has settled deals with certain (price) increases with miners as of April" and will pay the price difference after iron ore talks are finalized.

According to reports, Asian steelmakers such as Japan's Nippon Steel and South Korea's Posco have already accepted massive hikes in iron ore prices this year of up to 90%.

Agreements by the Asian steelmakers in the iron ore talks have previously served as a benchmark in global negotiations.

Copyright Agence France-Presse, 2010

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