Brazil - 2008 November 2   Brazilian Companhia Vale do Rio Doce (Vale) are not delivering 2008 contract iron ore volumes into China without the 12% increase requested, CEO Roger Agnelli said speaking on an earnings call Friday.

 

Back in September 2008, Vale confirmed that it was talking to Asian iron ore customers about increasing ore prices. At the time Vale said it wished to bring Asian prices into alignment with those for European customers, which Vale says are 11% to 11.5% higher than Asian prices. The company used the term "price convergence" to describe its intentions.

 

However an executive at a large steel mill in China says steel mills have postponed contract deliveries in Q4 due to the extremely poor market. "No matter whether they ask for an increase or decrease, no one is buying."

 

An Australian based trader also confirmed that most Chinese steel mills are trying to postpone contract volumes from both Brazil and Australia for Q4 2008 and are purchasing domestic ore instead. "The steel mills are very happy with the Brazilians decision not to deliver unless they accept an increase as then there is no pressure to take the cargo," the trading source added.

 

Iron ore spot prices have dropped over 65% since the beginning of June 2007 according to Platts data. Chinese steel mills have cut back production in some cases by 50% and in others have shutdown completely. "If the market was going up then perhaps the Chinese steel mills would be more open to the suggested price increase," a source at a Chinese steel mill said.

 

Earlier this year Brazilian producer Vale settled with Baosteel a 65% increase on iron ore fines, while the Australian suppliers achieved an increase of 79.9%. The reason being that at the time there was a substantially higher freight cost from Brazil versus Australia. A Chinese trading source pointed out that the Chinese steel mills agreed 2008 contracts with the South Africans with the same price increase as the Australians, and that is "unfair," the source said.

 

 

 

Editor:    Ivy

M S N:   noble-ferroalloys@hotmail.com

E-mail:    tiandandan226@yahoo.com.cn

Write to editor: service@ferro-alloys.com