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Aftermath Over 71.50% Iron Ore Price-Up Settlement
= None too small reactions on larger-than-expected price markup emerging in Europe and even in Australia
The settlement by the Japanese steel companies on 2005 iron ore prices at a 71.50% markup is generating aftermaths. Arcelor of Europe in its Feb. 22 press release: "Arcelor considers that this settlement, involving relatively small volumes, cannot be considered as a benchmark for 2005 contracts, " affirming it will keep on negotiations with all its suppliers. On the other hand, Australian Portman Limited which is advancing talks with US Cleveland-Cliffs (CLF) over its takeover of Portman shares, is analyzing the impacts of the 71.50 percent price settlement on the CLF offer and intending to provide the market with a further update, when appropriate.

[Arcelor statement]
On the same 22nd as iron ore price settlement was announced, Arcelor produced a sort of unusual statement: "The company is pursuing its negotiations with all its suppliers as for other products, with a goal to reach an acceptable compromise between a short-term vision based on a limited and volatile spot market, and a sustainable medium-term approach preserving the competitiveness of the steel industry supply chain as a whole, including its customers, and maintaining a level global competitive playing field."

Arcelor is the world largest steel producer operating widely across Europe, with blast furnace integrated steelworks established in France, Spain and Germany. Arcelor has been heavily dependent on Brazilian iron ore, at a share of nearly 70% of its total imports. While redirection to Asia of Australian iron ore export is progressing these days, its dependence of Brazilian ore is expected to be increasingly strengthened hereafter.

When the news spread worldwide in January that CVRD board was seeking a 90% price increment, European steel mills were reacting against it with a strong disagreement.

[Portman studying implications of 71.50% increase]
As reported before, the 2005 round iron ore price talks between CVRD and Nippon Steel Corp came to a settlement February 22 at a 71.50 percent price increase applicable for April 2005 onward.

On the following 23rd, Portman announced that its board was considering the implications of this price settlement in relation to the Cleveland Cliffs (CLF) offer; a further update would be provided to the market as soon as the board would be in a position to do so; and shareholders were advised to consult their professional adviser with respect to any action they might take in respect of their Portman shares.

Ahead of this, CLF announced February 16 that its offer to acquire all of the Portman shares would be declared free of all conditions if its relevant interest in Portman shares exceeded 51% (by number) by 5:00 p.m. (Sydney time) on Mar. 1, 2005, and that it was extending the offer period to 7:00 p.m. (Perth time) on Marc. 11, 2005, unless further extended or withdrawn.

[JISF Chairman Mr. Mimura: 'I do hope iron ore suppliers struggle to increase production capacity.']
Akio MIMURA, Chairman of The Japan Iron and Steel Federation, and President of Nippon Steel Corp, when asked Feb. 24 about his comment on the 71.50% increase, said, "Frankly speaking, it's very high. I do hope iron ore suppliers struggle to increase their production capacity well capitalizing on the derived funds from the price increase. I expect the tightened supply - demand situation of iron ore will be rectified within three years upheld by the expansion projects that are under way in Brazil, Australia, etc."
last modified : Wed 02 Mar, 2005 [11:11]
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