Interfax-China reported that the bargain position of China, which is still negotiating benchmark iron ore prices with the world's top three suppliers, is increasingly diminishing as Brazil's Vale has settled on a 28.2% price cut for iron ore fine in 2009 with Japan's Nippon Steel Corp and South Korea's POSCO. Japanese steelmakers Sumitomo Metal Industries Ltd Kobe Steel Ltd. and Nisshin Steel Co Ltd all followed suit settling on the same price cut.

Mr Wang Sujuan an industry analyst with Mysteel Information said "China is in an extremely passive position at the ongoing price talks with both Brazilian and Australian iron ore miners, now that most Asian mills have concluded negotiations, and the price cuts are less than what the Chinese are demanding."

The China Iron and Steel Association has been insisting on price cuts of at least 40% on iron ore fine, but Chinese steel mills may eventually have to accept the reductions agreed between Japanese and South Korean steel mills with Rio and Vale respectively.

However, another industry insider close to the CISA, who asked to remain anonymous, told Interfax on June 11th that the CISA will persevere with its request for bigger cuts and may even be prepared to go without long-term prices in 2009. He added that overseas miners are now relying more on long-term contracts with Chinese steel mills to secure sales, as China is among the few countries that may see a rise in crude steel production in 2009.

He also noted that even if China had to source iron ore from the spot market alone in 2009, it would not be too much of a disadvantage as spot prices will not substantially increase due to the weak steel product market.

(Sourced from Interfax-China)