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Mills in Japan, S. Korea mills say no start yet for iron ore talks – 18 Jan 10

Posco, JFE Steel and Sumitomo Metal Industries (SMI) have yet to start annual benchmark iron ore price talks, sources told MB, denying reports that the talks have started.
"We haven't started price negotiations on iron ore. Neither is there any plan to start soon," said a Posco spokeswoman.

Sources close to the Japanese mills also denied reports that the negotiations will kick off next week.
"There is no schedule yet for the talks," said a source at one of Japan's biggest steel producers.
"We haven't started price talks with miners yet for the year… the negotiation may start a bit later this year than usual," said a second major Japanese mill source.

Miners are in no hurry to come to the negotiating table, as spot prices have risen sharply and steel production rises across the world, increasing demand for raw materials. 

Earlier this week, the Financial Times reported that BHP Billiton, Vale, and Rio Tinto plan to settle first with Japanese mills, then offer the price to China on a "take it or leave it" basis. 

One of the Japanese mills among those yet to start iron ore talks is still working on its annual production plan, without which it cannot decide iron ore purchasing volumes, said the second source.
"The plan may be finished in the second half of February," he said.
An SMI spokesman confirmed that negotiations have yet to start and said he was unsure as to when they would, while spokesmen at JFE and Nippon Steel declined to comment.

Institutions like UBS, Deutsche Bank, Goldman Sachs and Macquarie predict that benchmark iron ore prices will rise 20-35% for the year.

"It is very hard to predict the price outlook, and the price talks may have to depend on Chinese mills as their purchase amount is huge," said the first Japanese source.

However, miners Vale, Rio Tinto and BHP Billiton have decided to sideline China to attempt settlement with mills in Japan and South Korea first, according to the Financial Times (MB Jan 12).

"It is really tricky to forecast iron ore prices for the year. Actual demand is not so much, but export prices are increasing," said the second Japanese source.

Some questioned if this was the best time for iron ore price talks to start.

"The market is very strong now and it is not an appropriate time for buyers" to start negotiations, said a South Korean mill official.
"Even Chinese mills and traders said [spot iron ore] prices are too high now… some traders have told me that the Chinese steel market is sort of in a bubble now as actual demand is not strong, although Chinese mills have a huge capacity for iron ore," said the second Japanese mill source.

Spot iron ore prices have risen nearly 18% so far this year, with 63.5% Fe material trading at $133-135 per tonne cfr China this week, up from $113-116 at the end of last year.

As the world's biggest iron ore consumer, China's iron ore imports surged 41.6% to a historic high of 627 million tonnes of iron ore in 2009, according to preliminary customs data

Jan 18, 2010 09:30
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