Bloomberg, citing Umetal Research Institute, reported that China may allow annual contract talks with Rio Tinto Group to lapse, with some steelmakers accepting Rio’s temporary offer.

Shanghai based analyst Mr Hu Kai, declining to name the steelmakers, said that some of the nation’s largest mills have accepted a provisional 33% price cut offered by Rio.

He however said that there may be no official announcement about the price agreement.

He said that “Rio is unlikely to budge on the price cuts because of the arrests as it would not be consistent with its business practices. The talks may end quietly as steelmakers accept the 33% as a provisional cut.”

Mr Hu added that “The steelmakers may swing back to buying from spot should the cash market fall in the future.”

Mr Tian Zhiping VP of Hebei Steel also said last week in an interview that it has accepted the provisional cut while the talks were continuing.

The China Iron and Steel Association, leading the price negotiations, sought a steeper discount than the 33% cut agreed by Japanese and Korean steelmakers after losses at its mills from the global recession. China on July 5 detained four Rio executives for allegedly stealing state secrets that it said harmed the nation’s economic interest and security.

(Sourced from Bloomberg)