Xinhua citing Mr Du Wei an Umetal analyst as saying that a global iron ore oversupply, lower spot prices, and huge stockpiles in China's domestic iron ore market will improve the odds of Chinese steel mills in securing more cuts in its iron ore price negotiation with overseas suppliers.

Mr Du Wei said "Despite a 33% price cut, the long contract price is still USD 8 to USD 9 higher than the spot price. Huge stockpiles should prompt China's steel makers to call for a bigger cut in iron ore prices in the progressing negotiation.”

Mr Du estimated that China's overall stocks had surpassed 110 million tons in consideration of 30 million tons of stocks by steel plants. However, analysts and insiders believe the negotiation will drag on beyond the end of June.

Mr Du said if the CISA compromises, the long contract price would be set at a high level during the peak season, and China's steel plants would suffer more in profit loss resulting from high costs.

Mr Luo Bingsheng, vice chairman of the CISA said "The global iron ore supply surplus is estimated to be between 200 million and 300 million tonnes."

Mr Luo also said China's steel maker would turn to the spot pricing, abandoning the benchmark price system, if the suppliers deny its 40 percent to 50% price cut request.

Mr Xu Xiangchun chief information officer of Mysteel.com said total iron ore demand is expected to drop between 150 million and 200 million tonnes this year.

China Iron and Steel Association refused on May 31st to accept the iron ore price cut between 33% and 44% reached between Rio Tinto and Japan's Nippon Steel Corp, and insisted on a price cut of more than 40% in the annual contracts of iron ore.


(Sourced from Xinhua)