Gordon Moffat, the head of the European Iron and Steel Industry Federation, once again criticized the international mining giants for requesting an increase of 80% to 90% of their prices to be “crazy†in an interview with reporters.
Moffat said that the sharp increase in prices is inconsistent with the basic supply and demand situation, and that the international mining giants are asking for prices, because this year's steel demand is forecast to grow by only 8% to 10%. He pointed out that although the current global economy is recovering, global steel consumption is expected to decline by about 27% this year compared to before the outbreak of the economic crisis in 2008.
In 2009, global steel demand fell by about 35% compared with 2008. After difficult negotiations, the international mining giants finally agreed to lower the iron ore price for the current year, a drop of only about 30%.
Judging by Moffat’s stand, the gap between the European steel companies and the international mining giants is very large, and the difficulty of the negotiations can be imagined. Although the annual April 1st is the beginning of the new year for the international iron ore supply contract, so far no European steel company has publicly announced that it has reached an agreement.
According to media reports, major Japanese steel companies such as Nippon Steel Corporation have recently taken the lead to reach an agreement with Brazil’s Vale, one of the world’s three largest mining giants, on the annual iron ore quarterly price in 2010, which is more than 90 percent higher than in the previous year. %. Since then, POSCO Korea, the world’s fourth-largest steel producer, has followed suit.
This has made the iron and steel enterprises in Europe and China in a more unfavorable situation in the negotiating of stale iron ore, because according to the international iron ore negotiation practice, as long as there is a steel company and miner agreeing on the new year supply, other negotiators will generally This prevails. Moffat said that this time the Japanese steel companies took the lead in surrendering to the mining giants, but European steel companies will not give up negotiations. He also expressed support for similar positions of Chinese steel companies.
According to preliminary agreements with steel companies in Japan and South Korea, the international mining giants are breaking the 40-year-old global iron ore long-term benchmark price negotiation mechanism, changing the annual price contract for the first quarterly pricing, trying to iron ore from the current The price is bullish on the market.
Professionals expect that when the price of iron ore is changed from the long agreement price mechanism to quarterly pricing, it will inevitably push up the iron ore price in the short term, and the price of steel will also rise accordingly. The benefit will be to the mining giants that have already earned a lot. We are.
The World Steel Association issued a statement last week opposing the change in the iron ore pricing mechanism. Association Director-General Ian Krismas said that although the long agreement price mechanism is not perfect, it has the advantage that it can maintain the long-term relationship between steel and mining enterprises, and is conducive to making long-term investment decisions instead of short-term. After pricing, the price of iron ore will fluctuate more, and it will not benefit either party in the medium to long term. He believes that the reason why the mining giants can force changes in the pricing mechanism is because the international iron ore market lacks competition.
At the end of last month, the European Iron and Steel Industry Federation issued a statement urging the European Commission to launch an anti-monopoly investigation of the possibility that the mining giants may collude with each other and threaten competition in the pricing of international iron ore. However, in an interview with reporters a few days ago, Moffat’s attitude has changed. Although Moffat emphasized that the long-term mechanism should still be adhered to in the long term, because it is beneficial to the maintenance of a long-term and stable relationship between steel enterprises and mining companies, it is beneficial to both parties, but he also stated that in the current situation, For the time being, the long-term mechanism was abandoned and quarterly pricing was changed. European steel companies considered it acceptable.
Although the bargaining prices of European steel companies and international mining giants have not come to an end, it seems inevitable that they will accept sharp increases in iron ore prices. Analysts believe that in the short term, European steel companies can still cope with the challenges posed by iron ore price hikes. By increasing the selling price of steel products, they will pass on the cost to the downstream. However, with the adjustment of stocks, the days of the second half of the year will probably be even more sad.
In the second quarter of this year, European steel companies can continue to produce iron ore that they have purchased for a period of time. Due to the sharp increase in iron ore prices, in order to prevent the price of steel products from rising, the market demand for steel products is second. The quarter will also be relatively strong, so the appropriate price increase for European steel companies will also have a good market.
However, in the third quarter of this year, the effect of iron ore price increases in the new year began to appear. Inventories have begun to adjust and European steel companies will face real tests. It is estimated that as the price of iron ore and coking coal rises, the production cost of European steel companies is expected to increase by 200 US dollars per ton.
Moffat admits that European steel companies are highly dependent on the import of iron ore, so the impact of iron ore price increases will be relatively large. According to data released by the World Steel Association, in 2008, the import volume of iron ore from the 27 countries of the EU exceeded 180 million tons, accounting for 19.4% of the world's total.
Iron and steel prices threatened far more than steel companies. As iron ore price increases will directly lead to the increase in the prices of steel products, which are important raw materials for many downstream industries such as automobiles and machinery and equipment manufacturing, many industries in Europe have recently been able to resist the rise in iron ore prices.
The European iron and steel industry has issued a statement a few days ago that the soaring iron ore price will hurt the fragile economic recovery in Europe. The statement said that iron ore is the basis of the EU’s most important industrial chain. If iron ore cannot be obtained economically and efficiently due to unreasonable pricing, it will affect European steel production and it will have serious consequences for the entire industry chain. Millions of people are employed.
The European Automobile Manufacturers Association also issued a statement in recent days expressing deep concern over the sharp rise in iron ore prices. The statement said that steel is an important material for the manufacture of automobiles. On average, a car consumes one ton of steel. Therefore, the current high price of iron ore and unpredictable pricing mechanism will damage the competition of European manufacturing, including automobile manufacturing. force.
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