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Baosteel Rio Tinto Iron Ore Price Unified Asia

2008/7/2 0:00:00 47

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Yesterday, South Korea's Pohang iron and steel official said it had agreed to reach the highest iron ore price agreement with Rio Tinto for up to 96.5%.

The agreement is in line with the agreement reached by Baosteel and Rio Tinto in June 23rd.

Japan's two steel giants Nippon Steel Corp and JFE steel also confirmed yesterday that Rio Tinto has agreed on the price of iron ore in 2008, which is also in line with the magnitude determined by Baosteel.

Rio Tinto also said yesterday that Rio Tinto has reached an agreement with Asian customers to price iron ore, including PB powder mine, Yang Di powder mine and PB block, which is in line with previous agreements with Baosteel.

So far, Asian markets have accepted the price agreement of Rio Tinto's highest increase of 96.5%, and the iron ore negotiations in Asia have finally come to an end.

Procrastination is tactic.

However, the matter of iron ore negotiations is not over. BHP Billiton, another Australian iron ore supplier, is still not satisfied with the price agreement between Rio Tinto and Baosteel. It is considered that the price increase does not take into account all the differences and can only compensate part of the freight.

The morning post contacted Baosteel's stakeholders. The source said that the negotiations between Baosteel and BHP Billiton are still in progress, and no real information has yet been revealed.

The two Japanese Steel Corp have not yet reached an agreement with BHP Billiton.

Insiders from the China Steel Association said to the morning post that in fact, the outcome of the negotiations will eventually come to a conclusion.

"BHP Billiton has no reason to further raise the price of Rio Tinto, and now BHP will only tentatively increase it in the time it can delay, and will eventually accept the current gains."

Chiang Kai Shek, an iron and steel analyst at Guotai Junan Securities, told the morning post.

Several other analysts interviewed by reporters also expressed similar views.

Zhao Xiange, an analyst with the steel industry of Everbright Securities, told the Morning Post reporter that BHP Billiton had a price guarantee for Rio Tinto, which would certainly raise its price in various ways.

Xu Xiangchun, an expert in iron and steel industry, told the morning post that even if the price was finally traded at Rio Tinto, BHP would deliberately create a "concession" result, so as to prepare for better prices next year.

The negotiation mechanism is meaningless.

Baosteel and Rio Tinto have gone through tortuous 4 months of negotiations, and finally reached an agreement of an average increase of 85%, which has broken the original "iron ore negotiation mechanism" to a certain extent. However, BHP Billiton, a supplier of Australian iron ore, did not follow the price agreement of Rio Tinto, and once again "made a difference".

The industry generally believes that the current iron ore negotiation mechanism in China has collapsed, and the traditional customary system has lost its meaning.

However, in June 30th, the China Iron and Steel Association issued a speech on the issue of iron ore price negotiations, saying: "we believe that the price agreement reached between Baosteel and Rio Tinto has safeguarded the current international iron ore price negotiation mechanism, which should be affirmed."

This is the second speech made by China Steel Association in June 23rd when Baosteel and Rio Tinto reached the agreement on iron ore price. Once again, they affirmed the agreement and reiterated the reaffirmation of the "failure of the negotiation mechanism".

China Steel Association 30 said in particular that the supply and demand sides are interdependent, and the other third parties do not need to produce iron ore.

The characteristics of this trade determine that the supply and demand sides of international iron ore shipping trade must establish long-term and stable cooperative relations, which should not only take care of the current interests of both sides, but also consider the long-term interests of both sides, so as to achieve the goal of "win-win" between supply and demand.

Xu Xiangchun said, "to get rid of the situation that relies heavily on the two development, at least we need to have a strategic attitude and framework to layout overseas iron ore supply channels, which will create pressure on the two development."

It is worth noting that since the beginning of this year's iron ore negotiations, the "two Tuo" has been making various public opinions, expressing "ultimatum" and "discontent" several times, which is higher than this price (the highest increase of 96.5% by Baosteel and Rio Tinto). Who will be the first to talk next year?

Who will talk first about who is suffering? Then we should consider the bargaining power separately, which obviously makes things more chaotic.

Wang Zhe, an analyst of CITIC steel industry.