CISA, ore producers fail to reach agreement

China’s steelmakers have failed to reach an agreement with major iron ore producers including Rio Tinto and BHP Billiton, but will continue negotiations, the Wall Street Journal reported. The China Iron and Steel Association (CISA), which coordinates iron ore negotiations for Chinese steel mills, had been pushing for ore producers to cut prices by nearly half from last year, arguing that weakness in China’s steel market required deep cuts. But market factors are undermining CISA’s claims. Many small steel producers have made their own deals with ore miners without the association and settled for higher prices. Steel producers are also building up production capacity to meet rising domestic demand, and are buying ore on the spot market. That has pushed prices up 12% from April, and above long-term contact prices, placing pressure on CISA to accept contract prices similar to those agreed to by other countries. Producers in Japan and South Korea have settled for discounts of 28% to 33% on the 2008 price.