China fails to settle on iron ore price reductions

China’s iron ore buyers may risk paying even higher cash prices as attempts to negotiate price reductions with suppliers have stalled, Bloomberg reported. Prices for ore for immediate delivery rose to US$82.50 per metric ton last week, a four-month high, after the China Iron & Steel Association rejected a 33% reduction in prices proposed by Rio Tinto Group, and let a June 30 negotiation deadline lapse. This means that Chinese firms must now pay spot prices for iron ore. Japanese and South Korean firms accepted the offers. “If spot prices move for a sustainable period of time to levels higher than the contract prices for 2009-2010 set with South Korea and Japan, the willingness to hold out for a better outcome by the Chinese steel mills will lessen significantly,” said Tim Schroeders, who helps manage US$1 billion at Pengana Capital in Melbourne.