CISA Agrees on Iron Ore Price Cut with FMG

飞雪寒冰

The China Iron & Steel Association (CISA) said it has agreed to a 35 to 50 percent price cut on iron ore for the second half with Australian miner Fortescue Metals Group.

Fortescue agreed to supply iron ore fines at US$0.94 per dry metric ton and lumps at US$1 per ton for the period July 1 to December 31, 2009, which is a 35.02 percent and 50.42 percent drop respectively from last year's level, the association said at a press conference here Aug. 17.

The price is a discount of about 3 percent on that agreed upon between other Australian producers and non-Chinese steelmakers.

The settlement comes amid the ongoing stalemate between Chinese steel mills and global miners BHP Billiton, Rio Tinto and Vale on contract prices to March 2010.

In a statement to the Australian Stock Exchange, FMG said it will supply 20 million metric tons of iron ore at about US$55.50 per dry ton for Fortescue-grade ore and around US$61 per dry ton FOB for high grade lumps, in the six months ending December 31.

飞雪寒冰

CISA has also guaranteed FMG will be given priority at talks on iron ore prices to 2010, the Australian company added.

A condition necessary for the agreement is the completion of financing worth US$5.5 to US$6 billion by September 30, 2009, by Chinese financiers on terms acceptable to Fortescue, FMG said.

On an August 17 telephone conference with the press, FMG said it is in talks with China's financial community on the financing plan but refused to disclose any of the finance sources.

"It's long-term infrastructure debt finance, not involving equity financing," said chief executive officer Andrew Forrest.

Earlier reports said that FMG was in advanced talks with China's sovereign wealth fund China Investment Corp over a $1 billion-plus convertible bond investment to help fund its expansion. FMG refused to comment on the issue during the August 17 conference.

飞雪寒冰

CISA secretary general Shan Shanghua said the miner, which is Australia's third-biggest iron ore producer, will produce about 95 million tons of iron ore in 2010, enabling it to supply around 20 percent of China's imports. FMG, in which China's Valin Steel holds a 17.4 percent stake, currently has annual capacity of 45 million tons.

Chinese steel mills will continue negotiations with the top three miners using the price agreed upon with FMG as a benchmark, Shan said.

The CISA has maintained a tough stance on iron ore contracts despite being squeezed by rising spot prices and increased steel demand driven by China's economic recovery and the government's construction-focused stimulus package.

In June, the association rejected the 33-44 percent reduction agreed upon by Rio Tinto and steelmakers in Japan and South Korea, saying that the settlement did not reflect the true conditions of supply and demand on the international market and would inflict enormous losses on Chinese steelmakers.

飞雪寒冰

Shan at the time said that Chinese mills would not back down from their request for a reduction of at least 40 percent on 2009 contract prices, which would be roughly equivalent to term contract prices for 2007.

One source close to the CISA told Caijing on June 30 that the semi-official industry body is willing to accept a price cut on iron ore contracts to March 2010 of less than 40 percent but will continue to reject the 33-percent price cut.

The 71 largest steel companies in China booked aggregate profit of 3.6 billion yuan in June as demand and prices rebounded, the Ministry of Industry and Information Technology said July 29. That followed total profit of 1.3 billion yuan in May, ending a seven-month string of losses.

magicmenny

这么长长的真的好锻炼英语实战水平.谢啦