Chinese steelmakers have decided not to import Brazilian iron ore in the near term after Vale asked for a price hike.

The China Iron and Steel Association (CISA) says Vale’s price demands are unreasonable. Several Chinese steel mills, including Baosteel and Wuhan Iron & Steel signed contracts early this week with domestic iron ore miners to use their products as a substitute for Brazilian iron ore.

Last week CISA wrote a letter to Vale, asking the world’s largest iron ore miner not raise the price of its iron ore by an additional 12 to 13%. In February Vale and several European steel companies agreed on a 65% price hike. Asian customers pay 11% to 11.5% less than European clients, according to Vale.

The Brazilian miner is trying to match the iron prices charged by Rio Tinto Group and BHP Billiton. Rio and BHP secured a price increase of as much as 97% this year, compared with Vale’s 71% increase.

Chen Xianwen, head of market research at CISA, told Bloomberg that Chinese steelmakers have rejected the price hike because of a slowdown in demand from the auto industry and construction. “It was agreed in the meeting that using domestic iron ore fines is absolutely feasible,” Chen said.

Iron ore prices have already significantly increased this year. The CISA says costs for China large and medium-size iron and steel manufacturers rose by nearly 58% in the first half of this year.

Chen told Bloomberg that Vale is now only shipping iron ore fines with a 62% iron ore content to China, suspending the shipment of higher grades that have 64 and 65% content.

China to stop iron ore imports from Vale

China will not import iron ore from Brazil-based Vale in the short term, a finance newspaper reported today.

Shan Shanghua, secretary general of the China Iron and Steel Association, said domestic ore will replace Brazilian products in a meeting on Tuesday that was attended by major Chinese iron and steel groups, according to China Security News.

The association considers the move reasonable due to weak demand for steel products at home and abroad, as well as price and quality advantages for domestic ore products.

This is the second meeting since Vale requested a price increase after annual contracts were signed. The request violated international rules on iron ore price negotiations, the report said.

The Brazilian miner has sought to raise prices for ore sold to Asian steel mills to bring it in line with agreements with European customers. Market watchers said Vale’s move may have been taken to position itself for a new round of price talks for iron ore that will start in November.

Vale traditionally granted discounts to Asian customers to make up for higher shipping costs compared to products from Australia, the report said.

Representatives of Bao Steel, Wuhan Steel, Jinan Steel, Shougang Mining Company, Benxi Steel Mining Company, Shunfeng Steel Mining Company of Liaoyang and Miyun Metallurgy Mining Company from Beijing attended the association’s meeting.

China steel group warns Vale on ore price demand

China’s steel industry, the world’s largest, will inevitably stop using iron ore from Brazilian miner Vale (VALE5.SA: Quote, Profile, Research, Stock Buzz) if it insists on a price rise, an executive at the China Iron and Steel Association said on Thursday.

China would encourage domestic iron ore miners to increase production and would decrease overall ore demand at steel mills, including through a reduction in steel product exports, said Luo Bingsheng, the association’s vice chairman.

“Vale’s price demand was extremely ill-advised as the long-term price for Brazilian iron ore and the spot price for Indian ore have reached the same level,” Luo said, adding that domestic iron ore inventories had increased substantially.

Luo said China would not ease controls on steel exports but would be likely to tighten them further, adding that sharp increases in steel product exports in July and August were atypical.

China’s steel association has sent a formal letter of complaint to Vale over its demand for higher payments for iron ore.

The moves came after Vale asked its Asian customers to pay about 12 to 13 percent more for iron ore under 2008 term contracts to bring their FOB prices in line with those paid by European steel mills.

Chinese steel mills met at the association’s headquarters last week, but failed to hash out a clear strategy for opposing Vale’s hike.

Iron ore exporting cos to go in for a higher price from importers

The major companies exporting iron ore from the country, MMTC and the National Mineral Development Corporation (NMDC), would go in for a higher realisation from iron export when they negotiate the supply contract with Japan and South Korea.

This was decided at a meeting of the Committee of Secretaries chaired by the Cabinet Secretary, Mr K.M. Chandrasekhar, to sort out the difficulties encountered by national mineral companies in the face of the levy of export tax of 15 per cent announced by the Government in order to make the domestic availability of the raw material for steel companies affordable at a time when steel prices do not show any let-up in their rise.

Highly placed sources in the Government told Business Line here that since the Australian iron ore companies have obtained a 96.5 per cent hike in their iron ore price from the importing countries, Indian companies too should negotiate with the Japanese and South Korean companies using this as a floor price to cushion the impact of export levy and spurt in freight cost for the iron ore producers.

They said as these companies renegotiate with their importing companies in Japan and South Korea this year around, they should get a minimum of 96.5 per cent hike as compared to the realised sale price last year.

Steel ministry wants 20% export duty on iron ore

The Union steel ministry has proposed the finance ministry to raise the duty on iron-ore exports from 15% to 20% as a mean to curb exports of iron ore further.

Steel minister Ram Vilas Paswan said that the steel ministry was is favour of complete ban of iron ore exports but other concerned ministries were not inclined to it.

The government decided to impose 15% export duty on iron ore in June after iron ore prices increased by 50% because of low availability in the domestic market.

The government should at least consider raising export duty of iron ore having 62% ferrous content.” Paswan said.

The committee of secretaries also decided to roll back export duty on steel, barring primary and semi-finished products as a measure to control steel prices and control inflation.

Paswan said that prices of steel has already come down by 15-20% and it is expected to remain stable at that level as the prices of steel has also started coming down internationally. He was in the city to attendthe 44 th anniversary of Metal & Scrap Trading Corporation.

“We have had a review meeting on August 7 and found that prices of steel in India were low compared with international prices. But steel prices internationally has also started coming down so there are no reasons for the prices to go up,” Paswan said.

He said if the steel companies are earning a profit margin of 15%, there are no reasons for the steel companies to increase prices, Paswan said

India may hike iron ore export tax – steel min

India is considering raising the tax on exports of iron ore, a key demand of steel firms facing falling margins, to increase supplies and help lower prices, the steel minister said on Monday.

Leading steel makers have asked for the tax to be lifted to 35 percent from 15 percent as they try to reduce input costs at a time when the government has leaned on them for months not to raise prices as it fights double-digit inflation.

“One issue is raising the export tax on iron ore. The government is considering it,” Ram Vilas Paswan told reporters after meeting officials of steel firms.

Pawan Burde, a steel analyst with Angel Broking in Mumbai, said it was likely the government would hike the export tax on iron ore, but possibly only to 25 percent.

“That’s very much possible because the government is against companies exporting high-quality iron ore,” Burde said.

India exported about 93 million tonnes of iron ore in the fiscal year ending March 2007, out of which about 75 percent went to China. Local miners say this could halve in the year to March 2009 as the existing tax makes rival suppliers attractive.

Earlier in the day, Paswan told an industry conference the sharp increases in prices of raw materials were a cause of concern and both steel and its raw materials needed to be at “reasonable levels” for sustained growth of the sector.

“A short-term approach on pricing of critical raw materials and steel has the potential to slow down growth,” he said.

Steel Secretary P.K. Rastogi said domestic prices could decline further in September, tracking international markets.

“They are not able to sell their products because people like to import rather than purchase from them, as their prices are high,” Rastogi told reporters


Booming steel industry prepares for Middle East Steel 2008

A recent report claims that the cost of steel has almost doubled (an increase of 91%) in the last six months.

And while the steel industry is booming in the region due to the extraordinary number of major construction projects, there is a significant imbalance between supply and demand.

Consumption of steel in the Middle East is growing at a phenomenal rate.

By 2010 the region is expected to consume 60 million tonnes a year, while expected to only produce 35 million tonnes per year.

This massive imbalance between supply and demand therefore means that the business opportunities for those involved in the region’s steel sector is immense.