Chen Xianwen, head of the Marketing Department of China Iron and Steel Association, confirmed to reporters: At 20:00 Beijing time on the 18th, Brazil's Vale announced that it had reached an iron ore benchmark price agreement with Nippon Steel and Posco. On the basis of the last fiscal year, prices for southern iron concentrates rose by 65% ​​and for Carajas powders by 71%. This will undoubtedly further increase the cost of Chinese steel enterprises. 

According to the estimate of China Iron and Steel Association, China's iron ore imports in 2008 increased by 40 million tons. Zhang Jingang, deputy secretary-general of China Iron and Steel Association, analyzed that this year's total imports exceeded 400 million tons. If the benchmark price of iron ore rises by 65%, the cost of Chinese steel enterprises in fiscal year 2008 will rise by more than 10 billion US dollars. 

Previously, due to the sharp increase in the price of iron ore, in December 2007, the average manufacturing cost of steel-making pig iron in China's large and medium-sized iron and steel enterprises increased by more than 30% compared with the same period in 2006, and enterprises have generally faced huge pressure of rising costs. 

Iron ore negotiations for the new fiscal year began in November 2007. The two sides of the negotiation are still in a "three-on-three" pattern: Australia's Rio Tinto, Australia's BHP Billiton, Brazil's Vale against China's Baosteel, Japan's Nippon Steel and European steel mills. 

As in previous years, price is still the main contradiction in negotiations this year. 

It is understood that this year, the three iron ore supply giants have offered price increases of more than 50% from the very beginning, but the Chinese side's point of view is quite different from that. 

In the absence of an agreement with China, Vale started negotiations with Japan's Nippon Steel and South Korea's Posco at the end of January. Finally, a price increase agreement for fiscal year 2008 was reached. 

According to the negotiation practice, the price set by the negotiating parties who set the price first will then be accepted by the supply and demand parties participating in the negotiation. From 2005 to 2007, the international benchmark price of iron ore increased by 71.5%, 19% and 9.5% respectively. During the iron ore negotiation in the last fiscal year, Baosteel took the lead in setting a price with a 9.5% increase with Vale, thus establishing the international price benchmark for that year. 

Different from previous years, this year's iron ore negotiation also involves the contradiction between long-term contracts and spot contracts. 

Australia's Rio Tinto, one of the three major suppliers, tried its best to increase the spot quantity in the new fiscal year. During the negotiation, Rio Tinto notified the relevant Chinese enterprises in writing that due to force majeure, the contracted supply would be reduced by 10%. However, while reducing the contract supply, Rio Tinto has announced that it will push 15 million tons of iron ore to the spot market for sale. 

It is reported that the iron ore supply in the market is currently divided into two types: spot contracts and long-term agreement contracts. In December 2007, the CIF spot price in China was close to US$200/ton, while the long-term agreement contract price was about US$50/ton FOB. , the highest sea freight is only 90 US dollars / ton. In fact, iron ore is exclusive, and it is beneficial for both parties to establish a long-term and stable relationship between supply and demand. In the past, the three major iron ore giants have made commitments to the China Iron and Steel Association to establish long-term and stable relations between the supply and demand sides. 

Unlike Rio Tinto's approach, BHP Billiton, the world's largest resource company, and Baosteel signed a 10-year supply contract for iron ore totaling 94 million tons during the negotiation. This is a new round of renewal of the original long-term iron ore contract between Baosteel and BHP Billiton, and an increase of 4 million tons on the basis of the previous round of 6 million tons per year. BHP Billiton will provide Baosteel with 10 million tons of iron ore annually at a price agreed by both parties in the next 10 years.