Japan Integrated Steels Agree with CVRD on Iron Ore Hike for F2007

Japanese integrated steel makers such as Nippon Steel and JFE Steel agreed with Companhia Vale do Rio Doce (CVRD) on Tuesday to increase the iron ore purchase price by 9.5% for shipment in fiscal 2007 starting April 2007 from previous year. Japanese steel makers followed the agreed price between Baosteel and major iron ore producers. Japanese steel makers’ purchase price increased for 5 consecutive years to total 2.9 times. The integrated steels would agree with Austrian iron ore producers at the same level. All Japanese steel makers purchase cost for iron ore is expected to rise by 80 billion yen in fiscal 2007 from fiscal 2006.General view is that Japanese steel makers purchase cost would increase in fiscal 2007 from fiscal 2006 including main material and other metal. The cost increasing is expected to cause the steel products price hike. Their contracted price is US 72.11 cents per dry metric ton unit, which represents US$ 47.59 per tonne for ore with 66% Fe produced at South powder mine, and which is US 73.20 cents per dry metric ton unit at Carajas powder mine. Japanese steel makers will determine the iron ore purchase price with Australian iron ore producers in the beginning of 2007, which is expected to reach an agreement same price of Baosteel’s contracted price with Australian iron ore producers that increases by 9.5% from last year including lump ore. It is expected that the cost increasing for hard coking coal purchase price by Japanese major integrated steel makers would be at 60 billion yen when they will decide to decrease the purchase price by 15.5% in fiscal 2007 shipment from last year with major coking coal producers. However, Japanese major steels expect the purchase price would rise for semi-coking coal, pulverized coal injection coal and iron ore when the supply and demand of those ore is tight more than hard coking coal price negotiation.