In 2009 iron ore negotiations are soon to open, when suddenly Vale do Rio Doce unilateral request price increases, so that Chinese steel mills surprise, emotionally difficult to accept. In fact, Vale intention was clear: If successful, then raise prices next year, should be shipping in Europe for compensation; price increase is not successful, next year, future battles can also be taking the offensive to prevent the long co-ore prices. The Chinese steel mills only to work together to take full advantage of the current adjustment of global economic decline in demand, as well as international and domestic steel prices dropped across the strategic opportunities, and to CVRD mining giants, led by the three showdown to seek maximum benefits.
Although the Vale do Rio Doce of unilateral price increase for iron ore can not be explained the reasons, but it can be a little out of reasons to two: First, the results of negotiations with the Chinese Australian ore over Brazilian ore rose up, the price increases are compensatory growth ; second is more expensive than Asia, Europe, Brazil ore price 11 U.S. dollars, in accordance with the principle of the same quality and price should prices.
The above two reasons, we carefully analyzed the case, the taste is not the same.
First of all, why mines in China and Australia reached an agreement higher than the Brazilian ore price increases when the Vale do Rio Doce is not clear that the disagreement?
In accordance with established practice, should accept the CVRD, Rio Tinto and Asian steel mills to achieve price increases Caidui. Always has a starting pricing of the Vale do Rio Doce 有苦说不出 reason is that the sea freight. In accordance with this crazy sea freight to calculate the time, Brazil to China than Australia to China than 58 U.S. dollars / ton, while the Australian offshore mineral ore in Brazil were lower than the high 10 U.S. dollars / ton. In this case, the two sides to the shore spread to 48 U.S. dollars / ton. Obviously, for the Chinese steel mills, the quality of even the best, the Brazilian mining there is no reason so much higher than the Australian ore, CVRD has naturally silent.
Now the situation has changed. The global economic slowdown, Brazil to China, sea freight from 108 U.S. dollars / ton storm dropped 48 U.S. dollars / ton, while in Australia to China, sea freight from 50 U.S. dollars / ton to 18 U.S. dollars / ton. This further if calculated in terms of CIF, the Brazilian and Australian ore mine on the difference narrowed to 25 U.S. dollars / ton. At this time, the feelings of Vale do Rio Doce is not the case, as the world's largest iron ore producer, the original pricing advantage instead become the first negotiations on a flaw. Conversely, since the Australian side can not abide by this rule, the Brazilian could not abide by the rules - the unilateral demands compensatory growth.
However, CVRD has not shameless as to make this reason, threw out a European price and the price with the price of price increases in Asia demands so doing is that about 12%. Currently, Brazil mines in Europe were lower than the Asian high prices of around 11 U.S. dollars. Therefore, if Vale price demands were met, then iron ore negotiations next year, it can justifiably be shipping to European steel mills compensation pay. Because the distance from Brazil to Asia than to Europe from the far more. Even if it fails, and Brazil's Vale do not suffer losses, and media publicity effect was achieved. 2009 negotiations, the subject could again get the negotiating table.
Of course, Brazil's Vale of unilateral price increase for iron ore, which in the hands of nature and some chips. Brazil's mining high-quality, will help the Chinese steel mills to improve efficiency indicators; Brazilian ore to China's Association for prices higher than the spot price of long-nearly 400 yuan / tonne. Therefore, Vale This increase is very strong stance. On the one hand intends to delay shipments to China, while Chinese steel mills threaten to reduce the supply quality.
Chinese steel mills this year in June compared to a very unfavorable situation, at present, the balance of the negotiations a clear preference for the Chinese side.
First, the global economic slowdown, almost all commodities have seen substantial price cuts, with the exception of iron ore price "monolithic", this makes no sense at all. At present, the iron ore mining has emerged spot down the Indian spot ore mine in Brazil has close to CIF. This long association ore formation of the impact of price stability. International steel prices began to fall, the global decline in demand for iron ore is no longer suspense.
Secondly, the Chinese steel sharp dive, steel mills face greater losses. Small and medium steel mills cut a large area cut-off, big steel mills also take the opportunity to cut through the overhaul. Difficult to guarantee reasonable profits in the steel against the backdrop of China's iron ore price rise is naturally very difficult to be recognized.
Third, China's iron ore port of pressure to reach 70 million tons to Hong Kong, which has the equivalent of the Chinese steel mills 2 months of imports, coupled with the Chinese steel mills cut production to reduce losses also interested, so the short term are not afraid of Vale do Rio Doce stock-out.
Fourth, the iron ore prices remain high, profits (100% or more) to stimulate the sharp rise in domestic mineral resources. At present, the domestic ore to meet the needs of the domestic steel mills there is still incremental.
Vale do Rio Doce for the prices of the requirements, as well as BHP Billiton's pre-cut message, the market believe that the negotiations for the 2009 rally. Chinese steel mills can work together to lay the hands of four cards, is critical. After all, the iron ore negotiations in 2009 is still a "bloody battle."
