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Nice....... should stem some decline in BHP & RIO


CVRD iron ore price rise seen paving way for Rio, BHP

Tuesday May 16, 2006, 1:40 pm

MELBOURNE, May 16 (Reuters) - Australian iron ore producers Rio Tinto Ltd./Plc (ASX: RIO) RIO.L and BHP Billiton Ltd./Plc. (ASX: BHP) BLT.L were likely to win iron ore price increases in line with a 19 percent rise secured by Brazil's CVRD, analysts said on Tuesday.

The rise would be above most market estimates, which one analyst said generally centred on a range of 10-15 percent.

CVRD RIO.NVALE5.SA, the world's leading exporter of iron ore said on Monday it had secured a 19 percent increase for 2006 in negotiations with Germany's biggest steel maker ThyssenKrupp A.G. TKAG.DE.

BHP Billiton and Rio Tinto both declined to comment on the deal by Companhia Vale do Rio Doce (CVRD) or the status of their own negotiations with Asian steel makers.

But analysts said historically a deal reached in one region would be quickly followed by equivalent agreements in the other.

"At this stage I would envisage that having got one settlement in Europe, it would be a way of forcing settlement in Asia at the same price," UBS analyst Glyn Lawcock said.

Iron ore producers achieved a 71.5 percent increase in iron ore prices last year, but steel makers have resisted further large price increases this year and talks on price settlements have extended past the April 1 start of the Japanese fiscal year.

China, which has overtaken Japan as the largest iron ore market, has been particularly vocal against another severe price hike.

"This year is a little bit different because you have a very strong and antagonistic buyer in the market and that is China," Daiwa Securities analyst Mark Pervan said.

"I the get the feeling that what will happen is that Japanese steel mills will probably follow pretty quickly at the same price and the Chinese will hold out as long as they can."

But Pervan said Chinese buyers were likely to also agree to a price increase close to the 19 percent set by CVRD.

"I think the iron ore producers will not be willing to concede much with the Chinese because it puts in jeopardy the whole pricing structure of the iron ore market," he said.

BHP Billiton shares eased 2.4 percent to A$29.93 and Rio Tinto shares fell 2.4 percent at A$82.18 in afternoon trade, after a tumble in metals prices, but analysts said the CVRD deal was limiting losses. ($1=A$1.32)
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Looks like CVRD have done the same deal with Posco (Korean). Also RIO have done a deal with Japan at the same rate. The Chinese are slowly getting squeezed. It will be interesting to see if BHP and RIO can get any of the freight differential they were trying to get last year.
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In reply to: theflasherman on Friday 19/05/06 12:48am

The chinese who are normaly good students of history, have slipped up here and should look back to the '70's early '80's for a mirror image when the japanese were screwing the the producers because the mills had the upper hand, how the wheel of history turns ever so subtley.....cheers jacsar

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In reply to: jacsar on Friday 19/05/06 02:46am

gday jacsar, flash

The chinese have bought this on themselves, taking far to long to settle prices.

They having been talking down the demand for ironore/commodities to try & drive down the price.

yet there gdp is rising faster than ever at 10% or more.

A recent news report showed fixed asset investment up 27% from a year ago.

I think the chinese probably reduced negotiations to an infantile slanging match.

Now they are paying the price. They are probably choking on their rice patties as we speak.


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In reply to: early birds on Friday 19/05/06 09:23am

early birds


care to translate into English?


One point to note so far... BHP have not done any deals... I suspect they are holding out for some of the freight differential over Brazlian ore.

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In reply to: theflasherman on Friday 19/05/06 07:26pm

it says, four of the steal maker who sign the deal don't represent the major players like Acelor,....still haven't done deal with 3 major supplyer yet.


that four who sign the deal they are the only samll player on the field. they are not the one who can set banch marks.


16 of chinese steal maker having a emergency meeting right now......


they said---- as 40% of wolrd's iron ore user, they won't follow others....... they have the time and size on their side.....



gees, you are killing me flasher. i'm not good at translate.


seems fight goes on.

i konw there is plenty Ore stock pile in Chinese wearhouse.

longer they drag on the argly it gets........ not good for both side.

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