Iron ore price negotiations- Shandong based mills face huge bill

July 7, 2008

July 7th (Steel Guru) – According provincial Economics & Trade Committee, BaoSteel’s agreement to pay 85% more for Rio Tinto’s iron ore this year would lead to CNY 7.96 billion increase for steelmaking costs for steel mills in Shandong, where iron ore imports have hit 58.96 million tonnes last year.

It’s the sixth year of steep contract ore price rise, which would push up input costs for domestic steel mills further higher. And statistics show that China has imported 145.6 million tonnes of iron ore from Australia last year, accounting for 38% of the country’s total ore imports, out of which, 80% is from Rio and BHP.

Shandong has become more dependent on overseas important resources recently. And local iron ore imports have jumped 7.2 times to 58.96 million tonnes last year from 7.15 million tonnes in 2000. Local iron ore imports have hit 32.58 million tonnes in the first five months of this year with import values of USD 4.26 billion up by 23.5% YoY and 80%YoY.

Of the total ore imports last year, 21.44 million tonnes of 36.4% are from Australia, and the overall 85% ore price rise this year will add input costs of CNY 7.96 billion for steel mills in the province.

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