Yes we are paying provisional iron ore prices - Baosteel

15 September 2009 | 05:06 Code : 19511 Geoscience events
Baoshan Iron and Steel Co (600019.SS: Quote), the flagship listed unit of China’s...

Baoshan Iron and Steel Co (600019.SS: Quote), the flagship listed unit of China’s biggest steel mill, confirmed on Monday that it was paying provisional benchmark prices for iron ore to major overseas miners.The miners, including Brazil’s Vale (VALE5.SA: Quote) and Australia’s Rio Tinto (RIO.AX: Quote)(RIO.L: Quote), have said the provisional prices matched terms they were demanding in annual price talks but that the Chinese steel industry has rejected as too high. This marked the first time that Baosteel, the nominal representative of the world’s largest steel industry in annual iron ore term price talks, acknowledged it had paid provisional prices.Vale and Rio Tinto have said they agreed to grant Chinese mills provisional contracts until new annual prices were settled.BHP Billiton (BHP.AX: Quote)(BLT.L: Quote), the other major miner involved in price talks, has agreed on annual terms with several Chinese customers matching a benchmark 33 percent price cut from last year that steel mills in Japan and elsewhere accepted, despite the leading Chinese industry group’s rejection of those terms. Baosteel did not confirm, however, whether its provisional prices matched the 33 percent price cut offered by miners."The provisional prices are prices agreed to by Baosteel and the three major miners for the issuance of letters of credit," Baosteel Vice President Chen Ying told an online briefing.Chen said Baosteel adopted the provisional prices because Chinese steel mills had not yet settled term iron ore prices with miners for the 2009/10 fiscal year, which started from April.Baosteel’s state-owned parent, aiming to lessen its dependence on the major miners, agreed to pay $240 million for a stake in Australian iron ore explorer Aquila Resources (AQA.AX: Quote) last week."(The Aquila purchase) will strengthen Baosteel’s control over strategic resources, weaken the monopolistic grip over global iron ore supplies and lower purchasing costs," Baosteel President Ma Guoqiang told the briefing.That deal followed China’s agreement to provide up to $6 billion in funding to Fortescue Metals Group (FMG.AX: Quote) in exchange for a deeper price discount than 33% to Baosteel and other steelmakers for Fortescue ore.Ma said the more favourable price for Fortescue ore would have only a limited impact on the company’s earnings, however, as the volume was relatively small

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