China's steelmills: iron ore producers should hold far-reaching insight
For a rise of 80%-90% in iron ore price mentioned by three iron ore giants, China's steelmills hope that iron ore producers can hold far-reaching insight . Deng Qilin, president of CISA, general manager of WISCO, said that accepting the unreasonable high iron ore price, steelmakers will go to extreme. Iron ore producers should not make the excessive profit, while steelmakers make no profit.
As largest iron ore buyer, China contributes to a large amount of profit for iron ore, but China faces the living pressure from the increasing iron ore price. CISA's data on February 9 showed that in 2009, 68 large and medium steel enterprises achieved the profit of 55.388bln yuan, down by 31.43% year on year. According to CISA's statistics, the sales profitability of 72 large and medium steelmakers was 7.5% in 2007, while it declined to around 5% in 2008, and even it slipped to 2.8% in 2009.
Quite different from it, three iron ore giants made huge profit. Rio Tinto's net profit increased by 33% year on year to U.S.$4.78bln; BHP Billiton's net profit in the second half of 2009 soared by 134% to U.S.$6.1bln; Vale's profit in the fourth quarter of 2009 climbed by 15% to U.S.$1.57bln.
The long-term cooperation concept built by miners and steel enterprises has been gradually replaced by the short-term sudden huge profit. However, a considerable increase in iron ore offer will make iron ore suppliers become the final loser. Experts pointed out that from the viewpoint of the global iron ore supply layout, iron ore resource is not rare. The iron ore price maintains high price for long time, which is bound to force steelmakers to seek for other resource supply channels to reduce their dependence on three ore giants. And therefore iron ore producers should quit the sentiment of making the sudden huge profit and hold the far-reaching insight to deal with iron ore pricing system.
