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08 Years Of Iron Ore Talks, Dust Settled, Bullish Expectations Continued

2008/7/7 0:00:00 55

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On the 4 day, BHP Billiton, one of the world's major iron ore producers, agreed on the price of iron ore in 2008.

BHP Billiton's Newman powdered ore, Yang Di powder mine and Newman lump ore will rise by 79.88%, 79.88% and 96.5% respectively in 2007.

This increase and price are in line with the results reached by Baosteel and Rio Tinto ten days ago.

Market participants said yesterday that the result was expected in the industry, but iron ore may continue to rise before 2012.

Maintaining the traditional pricing mechanism is of great significance.

Some people at Baosteel do not want to talk about this, but just say that maintaining the traditional pricing mechanism is of great significance to both the ore supplier and the demand side. The result of this negotiation has kept the price framework unchanged, and it is a win-win for the long-term stability of the upstream and downstream industries.

The reporter found that this statement coincide with Baosteel's official statement when it arrived at Rio Tinto's agreement on mineral price.

People say that the cost of iron ore rise is no doubt about the cost of the company, but the impact is controllable.

Baosteel Group is currently committed to restructuring the Guangdong iron and steel industry. "Enhancing negotiation capability is not empty talk, there are practical means to enhance the concentration of domestic iron and steel enterprises, and it is also an important means to deal with iron ore rises and increase future bargaining chips for iron ore".

SOEs need to find more long-term resources

Gao Bo, an analyst with my steel network, said that China's steel enterprises should keep up with the international steel giants as soon as possible and increase the acquisition of overseas mining enterprises' equity.

From the perspective of mining, the cost of mining, mining machinery, labor and so on is at the highest level in history, and the risk of independent mining is very large. The stake in investment mines can avoid these risks and share the benefits of the rising price of the mine. Moreover, in the purchase of mine ownership, holding is better than holding no shares, and joint acquisition is better than single acquisition.

Gao Bo believes that before negotiations, both sides must have an account in mind.

In the negotiations with Australian enterprises, although the Chinese side has been more tough, but after all, the bottom line is insufficient, because the failure of the negotiations has a great impact on China. The basic contract with the two largest suppliers is the largest domestic enterprise, and can accept the requirements of Australian suppliers.

If the negotiations are broken up, only using Brazil ore or spot ore, China's steel plant will pay at least 30 US dollars per ton or even higher. At the same time, the COA agreement signed with the international shipping giants will be meaningless.

Che Jianwei, general manager of Hongkong Mega Heng iron and Steel Co., Ltd., Shanghai representative office, believes that Baosteel should learn from the negotiation methods of the overseas steel giants such as Nippon Steel and other foreign companies, so as to avoid being caught in an unfavorable situation too early.

"The misunderstanding of the negotiations of domestic steel enterprises lies in the fact that there is always a" very tough "thinking inertia, which immediately sets out their own price and strongly demands that negotiators must accept their own quotas, which leaves room for the two sides to be very small, and is not conducive to the formation of good psychological expectations of the iron ore giants. Finally, the domestic steel enterprises themselves are forced to face the reality and can not stick to their tough stance and have to accept the other party's demands, very passive.

Che Jianwei said that the international steel enterprises often adopt the way of "counting the good debts and going to talk" in the negotiations, first of all, give the other party enough space for anticipation and favorable conditions, so that the two sides can negotiate in detail about the price and avoid the ups and downs.

Bullish expectation continues

A Energy Development Corporation manager who runs the main ore trade said that traders are expecting a strong rise in the price of iron ore. "We expect to continue to rise and run at a high level before 2012."

After the signing of this agreement, Australia's iron ore enterprises may continue to raise the demand for compensation for the increase and maritime charges next year. Meanwhile, Vale will also no longer rush to reach agreement with the domestic steel enterprises and wait for the Australian suppliers to reach an agreement.

In this way, "the price of the whole will be raised again, and the possibility of disintegrating negotiations by using the quality and pportation cost of different mines in Australia and South America" is no longer possible.

Che Jianwei said that the higher the price of overseas iron ore, the smaller the demand growth. Many small and medium-sized traders will face the risk of increasing profits and even encounter the fate of shuffling.

He said that since April, the supply and marketing situation of the domestic iron ore market has been in the doldrums.

At present, similar to large iron and steel enterprises, large iron ore trading enterprises begin to use overseas mining or overseas mining enterprises to participate in the stock market to avoid trade risks and share profits from iron ore rising.

For example, mega Heng Steel currently has mines at home and abroad, among which mines in Philippines have been operating for many years and their profits are stable.