According to the China Iron & Steel Association with the gradual reverse of supply demand situation of iron ore, China steel producers will have more bargaining power.

Since early July, iron ore prices have started an upward trend as the steel market is rebounding. The world's top three iron ore giants, Rio Tinto, BHP Billiton and Vale SA are taking this opportunity to push forward their new pricing regime.

The narrowing gap between iron ore contract prices and spot prices will not impact the market much.

One analyst said "But the key problem is that the new pricing mechanism provides larger room for iron ore speculation."

Mr Luo Bingsheng vice chairman of the CISA said that the iron ore suppliers are currently seeking short-term super profits, violating their cooperation with steel producers and worsening the fluctuation of iron ore market.

However, the CISA also predicts that China steel producers will be able to reject the ore giants' new price mechanism due to the reversing iron ore supply-demand situation.

Data from the association showed that China produced more iron ore for steel mills in the second quarter of 2010. China's iron ore imports have been declining for three consecutive months from April to June while domestic iron ore output increasing 37.6% over the first quarter.

(Sourced from People's Daily Online)