Commodities | May 19 2006
By Robert Rudnicki
Despite desperate attempts to negotiate a lower iron ore price hike, China’s lead negotiators, Baosteel, look to be left with few options with Rio Tinto (RIO) and Brazil’s Companhia do Vale Rio Doce (CVRD) announcing that Japanese steel mills had accepted a 19% price rise.
While the Chinese had been hoping that a two year deal would average the price down, with many forecasters now predicting strong prices to continue into next year it seems the Chinese, the world’s largest consumer of iron ore, is left with almost no options, other than buying at spot prices.
Over the past few years China has been know to be seeking more influence in price negotiations, so the Japanese acceptance without much involvement from its Chinese counterparts is not likely to be well received.
Credit Suisse is among those expecting further price rises in Japanese fiscal 2007.
While the analysts concede it is still too early to be making precise forecasts, they expect more price rises next year, and they say this opinion is supported by the demand and supply outlook.
While the fine iron ore fines increase has come in at 19%, Credit Suisse anticipates the lump price to rise to be in the 10-15% region, with negotiations expected to be finalised over the coming few days.
It has to be noted that prices for pellets seem to retreat a little, but industry sources told FN Arena News this is simply a catching up movement. The price rise for pellets was considerably higher than those for iron ore fines and slumps last year (87% versus 71.5%).