China's Shanxi province steel makers sign independent iron ore contracts

Steel makers in the northern Shanxi province in northern China have broken ranks with other large Chinese steel companies by having reportedly signed 2009 long-term contracts for iron ore supply with foreign miners.

The move by the Shanxi province steel mills comes despite the China Iron and Steel Association (CISA) asking Chinese steel companies not to make individual contracts until the annual contract price for iron ore is settled with the three global mining giants.

The Southern Metropolis Daily, citing Zhu Fengliang, secretary general of the Shanxi Iron and Steel Association, said that many steel companies with a combined annual steel production of over 1 million tonnes from the Shanxi province had already jointly negotiated long-term supply deals with overseas miners.

It said these mills did not accept the 33-per cent price reductions that ore miner Rio Tinto had struck with Nippon Steel (See: Chinese steel makers reject new ore contract rate in Rio-Nippon deal) but managed a better deal although differences remained among the steel mill owners since they adopt different purchasing channels, but there was no further detailed information on the pricing aspect. 

The paper reported that Zhu Fengliang said that the steel mills have refused to reveal the contract price to the association citing confidentiality.

Earlier, 35 mills were reported to have signed 50 million tonnes worth of long-term iron ore supply contracts with Vale of Brazil, although the miner has not confirmed the deal.