Iron ore Sistemas de Recubrimiento en Polvo price rise unlikely: analyst
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Iron ore price rise unlikely: analystPublished: 15 Oct 2009 09:02:01 PST

By Sun Zhe

The price of iron ore is not expected to rise during the upcoming negotiations between top foreign producers and the Chinese Steel and Iron Association (CISA), which represents the whole domestic industry.

China is the world's leading importer of iron ore.

The country's steel makers have been suffering from low profits or losses beginning in August, after three positive months driven by a rocketing steel price, said Guo Cunmin, a Hainan-based steel industry consultant.

"They just started turning a profit in May, after they used up their inventories which were filled last year when iron ore was at its highest price ever," said Guo. "But the boom only lasted until July."

CISA has sent clear signals that it wants a price cut. In recent days it has talked of oversupply in iron ore imports and declared its intention to cut back on overcapacity in the steel industry. Luo Bingsheng, CISA vice-chairman, said this week that the oversupply left no room for price increases.

Steel prices in China have fallen 25 percent since reaching a 10-month high on August 4, according to CISA.

"The iron ore was four times more expensive in 2008 than it was in 2003, and considering that most Chinese steel makers are losing money, there is a lot of room to lower the price," said Guo.

Vale, Rio Tinto and BHP Billiton, however, are seeking a 30- 35 percent increase in iron ore prices for 2010-11, according to a report in the Financial Times. The miners believe that an economic recovery that will drive up steel production in China is on the way.

The iron ore negotiations usually start late November or early December every year, and normally conclude around March or April the following year. This year's round, however, will likely be as difficult as last year's, which ended without any agreement being reached at all.

CISA turned down the top three iron ore giants' offer of a 33 percent cut on the 2008 price, which Japanese and Korean steel makers accepted in May. The industry later signed a deal that cut the price by 35 percent with FMG, Australia's third biggest iron ore producer.

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