Japan Steels Accept 19% Hike of Iron Ore

Nippon Steel and Japanese integrated steel makers agreed with major Australian and Brazilian miners by last week to increase the purchase price of fine and lump iron ore by 19% for fiscal 2006 shipment started in April fiscal 2005. Japanese steels followed benchmark price settled by European steel maker. The miners succeeded to be accepted the wide hike though it is lower than 71.5% hike for fiscal 2005 through the tough approach under the tight supply caused mainly by Chinese higher demand. Japanese steels will pay around 100 billion yen more for iron ore for the year than previous year. The iron ore price increased to 2.6 times in the hikes for 4 consecutive years, which increases the cost by 450 billion yen for Japanese steels. Japanese steels agreed for iron ore price with CVRD of Brazil, Rio Tinto’s iron ore subsidiary, Hamersley Iron of Australia and BHP Billiton of Australia. The new Australian fine ore price is FOB 73.45 US cents per dry metric ton unit, which represents US$ 46 per tonne for ore with 63% of Fe. The lump ore price is 93.74 US cents per DMTU. The Brazilian ore price is 65.85 US cents per DMTU for Southern System fine ore and 66.85 US cents for Carajas fine. The prices renewed record. The prices doubled in 2 years after the jump in fiscal 2005. They kept the price negotiation since the end of 2005 under the tight supply when China increases the iron ore import rapidly. European and Japanese steel makers were major players before but China joined the negotiation and resists any price hike. The supply got tighter with higher Chinese import and shipment troubles caused by Australian cyclone while their negotiation took longer time.