China Stance

Baosteel names new iron ore negotiator

(China Daily/Agencies)
Updated: 2010-01-16 07:54

Steel firms want fresh start after failure to agree prices last year

Baosteel Group Corp, China's biggest steelmaker, named Wang Liqun as its new chief negotiator for iron ore contract talks, an executive said, amid forecasts that prices may surge as much as 50 percent.

Wang, general manager of the raw material purchasing center at Baosteel's Baoshan Iron & Steel Co, will replace Ding Shouhu, said the executive who declined to be identified because of company policy. Ding, a manager at the center, was the chief negotiator for the Shanghai-based steelmaker for the past two years.

The appointment, along with a new negotiator for Rio Tinto Group, the second-largest iron ore exporter, indicates that Chinese steelmakers and miners want to start afresh after failing to agree prices last year.

"Baosteel's new negotiator faces a hard task as China has almost no bargaining power," said Hu Kai, a Shanghai-based analyst with researcher Umetal.com.

Baoshan Steel shares dropped 0.3 percent to close at 8.68 yuan ($1.27) in Shanghai. Rio's shares closed 0.7 percent lower at A$78.62 ($72.50) in Sydney.

Wang and Chen Ying, vice-president of Baoshan Steel, didn't return calls seeking comment. Wang was a deputy general secretary of the China Iron and Steel Association in 2005 and 2006, according to the association's website. The association had led the unsuccessful price talks last year.

The four-decade annual iron ore pricing system was fractured last year after Rio, BHP Billiton Ltd and Vale SA, which together account for three quarters of traded iron ore, refused to meet China's request to cut prices by more than 33 percent during the global recession.

China is the world's largest buyer of iron ore and last year increased imports by 42 percent to a record 628 million metric tons. Benchmark prices may surge 50 percent this year as the economy rebounds, Nomura Holdings Inc forecast on Jan 11.

London-based Rio Tinto appointed Danny Goeman as the new negotiator with Asian steelmakers, reporting to Will Malaney who was the company's chief negotiator, a spokesman said last month.

China price

Rio needs to hear from China "as to exactly what their view is in relation to prices", Sam Walsh, chief executive officer of the company's iron ore unit, said on Nov 2.

China wants to set iron ore prices separately from the rest of the world to exercise its bargaining power as the largest buyer, the China Iron & Steel Association said on Oct 16. Annual contracts for China should start from Jan 1, instead of April 1, the current practice, the association had said.

Cash prices of 62 percent iron-content ore delivered to Tianjin port in China last week climbed to the highest in at least 13 months, according to the Steel Index.

Prices had jumped amid a surge in buying by Chinese mills concerned about the availability of cargoes from Australia, Goldman Sachs JBWere Pty said.