Nippon Steel, JFE Steel, POSCO Accept 65% Fine Ore Hike for F2008

Nippon Steel and JFE Steel each agreed with Vale of Brazil to increase the fine iron ore purchase price by 65% for fiscal 2008 from fiscal 2007. The price increases for 6 years in a row and increases to 4.8 times during the period. The hike is second wide after fiscal 2005 in percentage and widest in value, which represents 2 times of increase for fiscal 2005. POSCO of South Korea also agreed with Vale and other makers and miners are expected to follow the settlement. The hike could increase the iron ore purchase cost by around 500 billion yen for Japanese industry pressuring on the steel price. The price increases to FOB 118.98 US cents per dry metric ton unit, which represents US$ 78.5 per tonne for ore with 66% Fe, for Itabira fine ore for fiscal 2008, up by 65% from fiscal 2007. They agreed for 6.19 US cents per DMTU of premium for Carajas fine ore on Itabira ore. Nippon Steel and POSCO settled the joint negotiation with Vale while JFE Steel separately agreed with Vale. Iron ore miners sought wide hike under tight supply when Chinese buyers pay 3 times higher for spot purchase trade than annual contact price level. Japanese integrated steel makers resisted wide hike for long term relationship. However, the steels finally accepted the wide hike to secure the requirement when world iron ore demand is expected to increase by 10% more in 2008 from 2007. The benchmark price is settled when one of major steels in Europe, Japan and China agrees with one of major iron ore miners including Rio Tinto and BHP Billiton. The settlement by Nippon Steel, JFE Steel and POSCO with Vale is expected be followed by other makers and miners. Japanese steel makers will keep negotiation for Australian ore, lump ore and pellet.