Long-term iron ore prices are not expected to see big ups and downs in the coming year, insiders said as negotiations between Chinese buyers and the world's major suppliers began.

 

Shanghai's Baosteel Group Corp has begun early discussions over the contract price for iron ore next year with Brazil's Companhia Vale do Rio Doce (CVRD).

 

Qi Xiangdong, deputy secretary-general of the China Iron and Steel Association was quoted by foreign press as saying he expects iron ore prices to change only by "a small margin" next year.

 

Investment banks, including Morgan Stanley and Daiwa, predicted the prices will go up 5 to 10 percent while Citigroup and UBS expect the price to decrease by 5 to 10 percent.

 

The Chinese side argued iron ore prices, which have increased 70 percent in 2005 and 19 percent this year, are irrationally high.

 

China is diversifying its sources of iron ore imports by increasing imports from India and increasing production at home to minimize dependence on iron ore from Australia and Brazil.

 

China's imports of iron ore will total 320 million tons this year, indicating annual increase will slow to around 10 percent, predicted the China Steel and Iron Industry Association.

 

Luo Bingsheng, vice-president of the association said in earlier interviews that China's demand for imported iron ore will continue to drop slightly.

 

The country's iron ore imports increased over 30 percent in average annually in the past five years.

 

Sixteen major steel manufacturers and China's largest two iron ore traders, China Minmetal Corp and Sinosteel Corporation, are reportedly being included in the negotiating body next year. The report was confirmed by an unnamed official with Sinosteel, but he said China's negotiating body with miners will still be headed by Baosteel.

 

(China Daily December 6, 2006)