Baosteel tests out long-term impact
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Baosteel Iron and Steel Co, China's largest listed steel maker, is importing iron ore at a temporarily-negotiated price and is carrying out stress tests to gauge the impact of possible new pricing mechanisms on its mid- to long-term costs, a company official said Wednesday.
"The company firmly supports long-term iron ore contracts. However, to deal with possible changes in the pricing mechanism, the company will seek new tools in negotiations and pricing systems to cushion any negative impact," Ma Guoqiang, general manager of the company, said during an online conference call.
Vale SA, BHP Billiton and Rio Tinto have scrapped the 40-year-old annual iron ore pricing system. Individual steel makers have been allowed to sign deals with the top three miners at provisional prices under China Iron and Steel Association's regulations.
Ma said the 2010 iron ore price talks are still ongoing with global miners seeking a price boost of as much as 100 percent. The mill said doubling of the iron ore price would lift costs by 600 yuan (US$88) per ton.
Meanwhile, the Australian government has decided to levy a 40 percent tax on resources firms, raising concerns that Australian miners will pass costs to steel mills.
"The tax is only one of the factors to influence the volatility in iron ore prices, and prices on the spot market have fallen recently," Ma said.
"Judging from the macro-economic conditions and downstream demand, the hardest time has passed," Ma added.
The firm's first-quarter profit jumped 44 percent from a year ago to 3.93 billion yuan due to rising demand from auto and appliance makers as well as higher steel prices.
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