Ma Guoqiang, general manager of Baosteel indicated at a recent conference that the current iron ore pricing mechanism would have to change.
Ma Guoqiang, general manager of Baosteel indicated at a recent conference that the current iron ore pricing mechanism would have to change.
“For a long time, Baosteel has followed the annual iron ore negotiation pricing mechanism, which has helped the company maintain stable production and operations.
“If the quarterly pricing system is applied, Baosteel’s operating stability, product pricing, inventory management, logistics management and cost control will all be affected.”
To handle these changes, he said the company would explore new means of negotiation and pricing and lower production costs.
According to Baosteel, the 2010 iron ore price talks are still ongoing, and steelmakers are importing iron ore at temporary prices. Most Chinese steel mills have imported iron ore at $105 to $110/t between April and June, up nearly 100% compared with the same period of 2009. The iron ore price on the spot market is even as high as $185/t.
He also indicated that one of the solutions for Baosteel is to acquire more resources overseas. Like many Chinese steel makers, Baosteel started investing overseas in 2001 during the downturn and acquired 16Mt of supply.
Despite the uncertainty in the iron ore market, Baosteel is still optimistic about the future of the steel market. According to Ma, the fluctuation in the steel market is normal.
He said the steel industry would enjoy long-term growth but only those competitive steel makers could survive and thrive in the market.
Source: China Metals e-mail [email protected]