MoF: China will support domestic steel makers in pricing discussions

China, the world’s largest consumer of iron ore, will stick to its annual pricing system and may take "trade action" to support domestic steelmakers’ negotiations with foreign suppliers, Bloomberg reported. Major foreign iron ore producers are seeking to shorten the pricing contract period after spot prices increased to twice that of annual contract amounts. Brazilian iron ore producer Vale (VALE.NYSE), is seeking to raise contract prices by more than 90% with Japanese steelmakers. The China Iron & Steel Association (CISA) rejected a similar increase suggested by suppliers, agreeing with a similar position taken by Eurofer, a European steel lobby group. Deng Qilin, general manager of Wuhan Iron & Steel Group (600005.SH), called on the central government to regulate the iron ore market because small Chinese steel makers continue to make side deals with suppliers prior to reaching a benchmark price agreement, sabotaging CISA’s negotiating leverage. CISA’s failure to reach an agreement with the major suppliers in 2009 resulted in Chinese steelmakers paying spot prices for the entirety of last year.