Nippon Steel and POSCO Agree in F2009 Ore Price with CVRD

Nippon Steel and POSCO agreed with CVRD in a joint price negotiation for iron ore until June 10. They decided to decrease the price by 28.2% for fiscal 2009 shipment from last year. The price showed the first year-to-year decrease in 7 years. Other Japanese steel makers also seem reaching agreements with CVRD. The price is lower than Rio Tinto’s price agreed in May, which was set 33% lower than previous year. There remain price negotiations with BHP Billiton. However, the price trend for fiscal 2009 is almost fixed since CVRD and Rio Tinto account for above 50% in global iron ore share.

The price decided between steel makers and CVRD is 85.43 US cents per dry metric tonne unit (DMTU) for powder ore in Itabira, lower by 28.2% from fiscal 2008. The price for powder ore of Carajas, whose grade is higher than Itabira’s, decreased by 28.2% to 89.87 US cents per DMTU. The price decreased by 44.47% to 99.42 US cents for lump ore of Itabira and by 48.3% to 110.43 US cents for pellet of Itabira.

In fiscal 2008, Japanese steel makers and CVRD agreed to raise ore price by 65% for Itabira’s powder. Following this agreement, Rio Tinto and Bao Steel of China decided to raise the ore price by 79.88%. This was an unusual case that price upsurge was wider for Australian ore than for Brazilian ore. CVRD succeeded in price gap improvement in fiscal 2009.

Ore purchasing cost for Japanese integrated steel makers is likely to shrink by 200 billion yen per annum in fiscal 2009.