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PrintThe negotiation between China and the three iron ore giants, namely BHP Billiton, Rio Tinto and Vale, is set to bring down the iron ore price from its 2008 peak, but China's goal of an 82 percent price cut would be a mission impossible, analysts said.
China is asking for a price cut of up to 82 percent, as "the steel prices have fallen to the 1994 level", Shan Shanghua, secretary-general of China Iron and Steel Association, was quoted as saying by Securities Daily yesterday.
Zou Jian, chairman of the China Metallurgical Mining Enterprise Association, agreed on a price cut. "But it will be very difficult to realize such an aggressive request," he said.
Jiang Qiu, an analyst with Guotai Jun'an Securities, said that the media report has distorted Shan's point. "It's true that Shan said iron ore price should reflect the price of steel products. However, he didn't say iron ore price should also come down to the 1994 level."
Jiang estimated a 20 percent drop with Vale, the largest supplier from Brazil, and a 25 percent cut for raw materials from Australia, where BHP Billiton and Rio Tinto are based.
Due to high shipping costs, in June and July Rio Tinto and BHP Billiton asked for a price hike of 96.5 percent when the shipping costs reached $108 per ton in June; but now the freight has softened to $6.8 per ton, Jiang said. –China Daily
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