In the prolonged battle with global iron ore miners for setting this year's benchmark iron ore annual contract prices, China, the biggest importer of iron ore, has finally blinked by reportedly agreeing to a 33-per cent price cut, as agreed by Japanese, Korean and Taiwanese steelmakers last month. (See: Chinese steelmakers upset with Nippon Steel's ore price-cut deal with Rio)
The Shanghai-based Chinese Business News, citing unnamed "informed sources" said yesterday that Chinese steelmakers have agreed to a 33-per cent price cut, falling short of their demand for a higher 40-per cent price cut.
The paper also reported that Chinese steelmakers and global miners led by Rio Tinto and BHP Billiton have also come to an agreement that the contract would be for a period of six months rather than the standard year-long arrangement and the price cuts will come into effect from April 2009 through to October.
The 33-per cent cut applies to Pilbara Blend iron ore fines, where China has agreed to pay $0.97 per dry metric tonne unit, while the price cut for the Pilbara Blend lumps is $1.12 per dry metric tonne or 44 per cent amounting.
The tense and tough negotiations, which went on for nearly nine months and even passed the 30 June deadline for finalising the contract, (See: Global iron ore miners locked in pricing battle with China) was fraught with danger of the negotiations breaking down, but the miners refused to budge since the global economic scenario was in a better footing compared to last year.
In the wake of the plunging demand for steel, Chinese steelmakers and its trade body, China Iron and Steel Association (CISA), were seeking price cuts of over 40 per cent on the annual contracts while miners had been unwilling to budge beyond 20 per cent.