Chinese Steel Makers to Curb Iron Ore Prices

In order to curb iron ore prices which have been greatly influenced by the rising freight rate, Chinese steel makers is in talks with suppliers.

"The surge in freight rates is unreasonable," said Luo Bingsheng, vice chairman of China Iron and Steel Association, at an iron ore conference in Dalian, northeast China. "Steel makers and miners should study together and take measures to stop the overpriced shipping costs from hurting global iron ore trade further."

iron ore demand from China, which produces a third of the world's steel, has sent prices up threefold in the past five years. Freight rates have surged ninefold, bolstered by crude oil prices that have soared to exceed US$93 a barrel, from US$33 at the end of 2002, said Bloomberg News.

Steel makers, including Shanghai-based Baosteel Group Corp, are set to negotiate next month with suppliers, including Cia Vale do Rio Doce, the world's biggest producer of the raw material, to agree on benchmark iron ore contracts for delivery starting in April.

Crude steel production in China may rise by a-10th to 530 million tons in 2008 from 480 million tons this year, Luo said. Major importers should negotiate prices on behalf of nearby smaller traders, he said.

The cost of bringing a ton of ore from Tubarao in Brazil to east China's ports of Beilun or Baoshan has more than doubled this year to US$87.188, according to the Baltic Exchange. That's higher than the US$73.20 that Chinese steel makers agreed to pay for each ton of iron in the ore from Brazil.