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It looks like CVRD's 90% price rise is a touch too much, but I think we already knew that!


BRUSSELS (AFX) - The European Confederation of Iron and Steel Industries (Eurofer) said the price increase for iron ore sought by Brazil's Companhia Vale do Rio Doce is 'totally unreasonable and disproportionate'.

CVRD said last month it would asked its clients for increases of 90 pct in the price of the iron ore it will deliver in 2005.

Eurofer said in a statement that such price increase would represent an increase in costs of nearly 3 bln usd for EU steelmakers.

'Following an 18.6 pct price increase last year, a request for a 90 pct increase is totally unreasonable and disproportionate to market conditions which are not fundamentally different from 2004'.

Eurofer said that Europe is reliant on Brazil for around 50 pct of the total European ore supply, noting that this is almost exclusively from the mines of CVRD and its subsidiaries.

These additional costs for the steel sector would come on top of major cost increases both last year and this year for all raw materials, energy and transportation.

These increases would have a huge impact on the manufacturing sector in Europe and affect the competitive position of the EU steel industry compared with steel producers in other regions that have integrated iron ore supplies, it added.

Eurofer's members are steel companies and national steel associations throughout the EU representing close to 100 pct of total steel production in the EU.

At 13.20 pm in Sao Paulo trade, CVRD's shares were down 1.11 pct at 64.72 reals, while the Ibovespa was 1.18 pct.
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GO FOR THE THROAT CVRD !!!!!!!!!!!!!!!!!!!!!!!

these fat cats need some slimming




Feb 10, 2005

Steelmaker's net rises 327 percent




Strong demand, higher steel prices and increased shipments provided Mittal Steel Co. with net income of $4.7 billion during 2004, a 327 percent increase compared with $1.1 billion during the prior year.


Rotterdam-based Mittal owns and operates Ispat Inland Mining Co., a 2.9 million ton-per-year taconite plant near Virginia.


According to Mittal's quarterly report:


The international steelmaker shipped 42.1 million tons of steel last year compared with 27.4 million during 2003. Fourth quarter 2004 shipments slid to 10.1 million tons, however, from 11 million in the third quarter.


Quarterly selling prices for steel increased by 9 percent. For the full year, they were 54 percent higher than during 2003. But the cost of goods sold grew 8 percent due to higher iron ore, scrap, electricity, natural gas and transportation costs.


Sales for 2004 were $6.6 billion compared with $4.1 billion for 2003.


In December, steelmaker Ispat International N.V. acquired LNM Holdings N.V. and changed its name to Mittal Steel.


Mittal currently is in the process of merging with Cleveland-based International Steel Group. The merger is expected to be complete in the first quarter of 2005.


Steel shipments, prices and raw materials costs are all expected to increase for the company this year.



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Thanks to Trader10 on the FMG board for this:


Iron ore price to soar

Andrew Trounson



AUSTRALIA'S iron ore miners have hit pay dirt with Japanese steel mills poised to accept a massive annual price hike after the world's biggest iron ore supplier, Brazil's CVRD, secured a record 71.5 per cent increase from Nippon Steel.


Shares in dominant Australian producers Rio Tinto and BHP Billiton are set to jump after rallying in London overnight as analysts upgraded their earnings forecasts.

The better-than-expected rise will also put pressure on US-based iron ore producer Cleveland-Cliffs to raise its $605 million bid for smaller West Australian producer Portman Mining.


The price rise will hurt steel producers such as BlueScope, which earlier this week was warning of the potential for soaring raw material prices to drive inflation and said it was considering slapping surcharges on products.


Asian steel makers have already been forced to cave in to the miners on a 120 per cent annual price in coking coal which, like iron ore, is used to make steel.


Soaring iron ore and coal prices are being driven by the Chinese economic behemoth as rapid industrialisation there sucks in unprecedented tonnages of commodities.


Chinese steel production jumped more than 20 per cent last year, and Nippon's decision to cave in on iron ore was driven by fears it could be caught short of supplies as its massive Asian neighbour buys up cargoes.


Chinese and Japanese steel mills and traders are increasingly investing in new Australian mining projects to encourage new supplies.


Between them, CVRD, Rio Tinto and BHP Billiton account for about 77 per cent of the global seaborne trade in iron ore.


The price hike will add billions of dollars to Australia's 2005-06 export revenues, although a strong Australian dollar will likely partly offset the full impact of the US dollar price rise.


Australia's export sales of iron ore are already forecast to rise 35 per cent in 2004-05 to more than $7 billion on the back of higher volumes and an 18.6 per cent price increase.


The CVRD price rise, effective from April 1, would increase the benchmark price of lump iron ore to around US80c per dry long tonne unit and the price of iron ore fines, or powders, to US62.7c per dry long tonne unit.


"It is an exceptional increase," UBS resources analyst in Sydney, Glyn Lawcock, said.


"The prices being achieved across a whole raft of commodities are setting new paradigms at this stage," Dr Lawcock said.


While prices are expected to fall in the medium term as production is expanded, in the next one or two years prices could yet prove sustainable, he said.


Dr Lawcock had been forecasting a 40 per cent price increase, and based on the CVRD price settlement he is upgrading his Rio Tinto 2005 profit forecast by 12.5 per cent, and his BHP Billiton 2005-06 forecast by 7 per cent.


The price rise will be cheered by Portman shareholders and the hedge funds that have piled into the stock in the hope of a counter-bidder or a sweetened offer. While hopes of a counter-bid are rapidly fading, shareholders will likely try and force Cleveland-Cliffs to raise its $3.40-a-share bid.


While the Portman board had approved the bid, it may now be forced to rethink its position.


"We will have to assess the situation as a board," managing director Barry Eldridge said. "We will have to sit down and reflect on what has happened."


Credit Suisse First Boston has built a 9.6 per cent stake in Portman, believed to be on behalf of North American hedge funds. Its research arm has suggested a share price of more than $4.00.


Portman ended yesterday unchanged at $3.48. Cleveland-Cliffs has so far secured just over 2 per cent of the target.


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10 November 2005


Iron ore miners brace for smaller price hike--------------------------------------------------------------------------------


After demanding price hikes of more than 70% this year on shipments to steelmakers, the world's three largest iron ore miners may be bracing for much more modest increases next year.


Analysts have been slashing their expectations for iron ore prices from a year ago as the boom in steelmaking, particularly across Asia, subsides, and as pricing talks prepare to kick off.


Brokerage JP Morgan forecasts the increase covering iron shipments starting April 1, 2006 could be as little a 7,5%, while National Australia Bank predicts only 5%.


Companhia Vale do Rio Doce (CVRD) of Brazil, Rio Tinto Plc. and BHP Billiton, which together control more than 70% of the global iron ore export market, irked long time customers last year by insisting on increases of 71,5%.


The idea that prices will go up as much as 20 percent is "intoxication", Guy Dolle, chief executive of Arcelor SA, the word's second-largest steelmaker, said in the Wall Street Journal on Wednesday.


The paper said Dolle predicted prices would recoil "back to the level of 2004." Dutch bank ABN AMRO predicts ore prices will rise 10%.


Arcelor last year was an outspoken critic of the miners' justification for the price increase - that Chinese steel demand had boosted steel prices everywhere.


However, the company eventually capitulated, as did Japanese steelmakers, setting the benchmark price for the entire industry.


"It's no longer the case," Dolle said. "How could they justify the iron ore increase in prices now?" China's major steel mills have already agreed to cut output of some high-end products by 5% in the fourth quarter after prices for some products fell as much as 50% since the start of the last shipping year.


Simply put, less steel production means less need for ore.


In Japan, Nippon Steel, the world's third-biggest steel maker, has doubled its planned production cuts for the second half of the fiscal year to March, slicing off one million tons.


JFE Holdings, the world's fourth-biggest steel maker, has also expanded planned cuts in the second half to 1,3-million tons from 500 000 t.


A spokesman for Rio Tinto said the company would not comment before an agreement, which could be in January or February. "The process takes months, a spokeswoman for BHP Billiton said. "But we definitely have not settled." There are also signs that the Chinese - also critics of last year's hikes - will hold some sway in setting prices, a process controlled until now in Asia strictly by the Japanese.


A day after agreeing to this year's hike, China's largest steel maker, Baosteel, implored the miners to seek "common prosperity" with mills, warning any ore shortage was temporary.


Any softening in demand could collide with multi-billion-dollar plans to tap more deposits in Australia's Pilbara, the largest single known reserve of iron ore.


BHP Billiton last month said it would spend $1,3-billion to expand iron ore output and rail and port operations.


It also said it would start work immediately to nearly double iron ore mining capacity to 42-million tons a year at its Area C iron ore mine, with output from the expansion to begin in the fourth quarter of calendar 2007.


BHP Billiton's partners are Japan's Itochu and Mitsui & Company, with 8% and 7% of the project respectively.


The company in July signed a joint venture iron ore deal that would secure long-term sales contracts worth about $4,3-billion with Japan's JFE Steel, the core unit of JFE Holdings and its existing Yandi mine joint venture partners Itochu Minerals & Energy of Australia and Mitsui Iron Ore.



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Further to my post on 26/10 iron ore is back in focus. However, I've noted that focus has been on explorers and those in that have many years to development of a mine.


Those that are close to production or in production haven't really done much. I note that ADY and AZR are actually going backwards.


I still think there is more to go in the iron ore game and I can even see substantial capex magnetite projects get off the ground in the mid-west.

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By Declan Conway

LONDON, Dec 6 Reuters - China holds the key to annual contract talks between iron ore miners and steel mills for next year deliveries of the raw material, dealers said on Tuesday.

Price talks typically get underway late in the year and can last for months, with the world market usually benchmarked against the first agreement between a big steel firm -- traditionally European or Japanese -- and one of the big miners.

But with China's emergence as the world's largest importer of iron ore, the industry expects that a Chinese steel mill may lead the first big contract.

"The outcome of the talks will really hinge on what is agreed between China and the miners," an iron ore dealer said.

"Most Chinese steel mills are against price rises and may want a reduction as domestic steel prices there are lower than other international markets.

"However, China really needs a push to consolidate and regulate its steel industry to strengthen its argument.

"Although it talks of slower steel growth next year, it must have 200-300 steel plants that have rapidly expanded and brought on another 100 million tonnes of capacity this year alone."

There is virtually no iron ore spot market in Europe, with deals done on a long-term basis.

The main spot market is in India, where prices dropped to $50 a tonne last month from $65 in April after China released measures to limit imports.

Iron ore was settled at about $52 a tonne this year, from $30 in 2004 and around $25 the year before.


China has consumed a vast amount of raw materials in recent years in an economy with current GDP growth at around 7-8 percent after hitting 9.4 percent for the first nine months of this year, according to state-backed trading firm Minmetals.

Its crude steel production was forecast to hit 340 million tonnes this year -- a third of world output -- with consumption just 10 million above that, also a third of the world total.

However, stocks were plentiful, with dealers a holding about a third of total domestic inventories, according to state-backed trading firm Minmetals.

China will have imported 264 million tonnes of iron ore by the end of this year, the Ministry of Commerce said on Monday.

It forecast imports would rise by a further 35 million next year, less than the 56 million forecast for this year due to falling domestic steel prices.

The ministry said it expected an iron ore surplus of 12 million tonnes next year as production of the raw material increased against slower Chinese steel growth.

The ministry's comments came as Chinese steel mills have campaigned to restrict iron ore prices supplied by the world's top miners, such as Companhia Vale do Rio Doce (CVRD), Australia's BHP Billiton and Rio Tinto after a 71.5 percent jump this year.

But on Monday CVRD said that world demand still outpaced supply, suggesting another price rise next year is justified.

"Demand remains strong, and our customers are going to have to take that into consideration," the company's chief executive Roger Agnelli said.

However, the steel industry is unlikely to accept anything like this year's rise, despite managing to pass that cost on to their customers, dealers said.

"Although they weren't happy with the price increase they were able to foist higher steel prices on to their customers, such as the auto makers," another dealer said.

"But the auto industry has consolidated, giving it a stronger voice when negotiating prices with its suppliers, so the fragmented steel industry will find it tough to maintain sales prices if their raw materials costs are cheaper."


07-12 0644


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