Bloomberg quoted Wuhan Iron & Steel Group, China third biggest steelmaker said Venezuela Corp Venezolana de Guayana will supply iron ore under a long term contract helping the mill to diversify its raw material sources.

Hubei province based company said without giving details that Wuhan Steel will buy the steelmaking material at China prices which will differ from the benchmark rates set yearly by the world’s top three suppliers. Corp Venezolana de Guayana is the only iron ore producer in Venezuela.

The agreement may pave the way for China to set iron ore prices separately from the rest of the world and exercise its bargaining power as the largest buyer. Chinese steelmakers and suppliers Rio Tinto Group, BHP Billiton Ltd and Cia Vale do Rio Doce have failed to reach a price agreement this year.

Wuhan Steel said Corp Venezolana de Guayana also known as CVG has a production capacity of 23 million tonnes this year. The South American nation has a proven iron ore reserve of 4.18 billion tonnes

The steelmaker said, without elaborating that Wuhan Steel will have a pre-emptive option on an expanded supply of the ore once the mining company completes its expansion plans.

(Sourced from Bloomberg)