Brazilian miner Vale is not not talking with Chinese steelmakers about the iron ore benchmark price for 2009, now and it will go on supplying iron ore to China at a temporary price, which is 60% to 80 % of the 2008 price, company CEO Roger Agnelli said on Wednesday.
Vale believes that the current price cut of 33% is reasonable and fair, as the price is lower than the current spot price, Shanghai Securities News reported, quoting Roger Agnelli.
Roger Agnelli said many of the Chinese steel mills are running out of previous iron ore stockpile and are building up their inventory again. Vale now is working at full capacity to meet the need of a resurgence in demand.
China refused to accept the drop in iron ore prices of 33%between another iron ore giant Rio Tinto and Japanese and South Korean steelmakers. When Vale and steel mills of Japan and South Korea agreed to a markdown of 28%, Chinese steelmakers still did not say yes.
The China Iron and Steel Association (CISA) has reached an agreement with Anglo-Australian Fortescue Metals Group Ltd (FMG), Australia's third largest iron ore producer, on a 35.02% price cut for iron ore fines last week. FMG promised that it would sell iron ore to Chinese steel mills at unified prices, 94 cents per tonne for fine ores and 100 cents per tonne for block ores from July 1, to December 31, 2009.
CISA hopes that the three largest global iron ore suppliers-Rio Tinto, BHP Billiton and Vale-will accept the price cut it agreed with FMG.
Though the steel price plunged during the last few weeks, the output of domestic steel mills has been high, boosted by bullish economic outlook over the long-term.
In August, the country's large and medium-sized steel mills produced on average a record high of 1.67 million tons crude steel per day.
But analysts say the price of imported iron ore is expected to fall by 15% after August, following the drop in steel prices.
Vale has decided to strictly follow its bigger rivals Rio Tinto and BHP Billiton this year in the iron ore price talks, as it suffered huge losses after the two companies secured better prices following Vale's hasty agreements with Japanese and S Korean steel mills over iron ore prices in 2008.