Economic Information Daily citing information from an internal industry meeting said the Chinese steel industry paid much more for iron ore imports last year because of the soaring prices, resulting in lower profitability or even losses for some steel makers
China steel makers paid USD 26.1 billion more to purchase iron ore from the world top three mining magnates from January to November in 2010 while the industry main business is expected to yield only CNY 77 billion during the entire year.
According to the report, the 40 year old long term supply agreement system was abolished when BHP Billiton made seasonal contracts with Japanese steel mills in March last year. Vale, a Brazilian mining exporter decided to set its first quarter export price to China based on the average price of Platts index from September 1 to November 30. It was calculated that the price is likely to hit USD 149.2 a tonne up by 8.8%YoY.
The report said China steel industry would pay an additional cost of at least USD 11.3 billion if the iron ore exporting price stays at the
November level in 2011 of USD 145.3 a tonne which would be the equivalent of the industry full year profit for 2010.
The newspaper cited an official with the China Iron and Steel Association as saying that "A good many of steelworks are in the red."
According to data from the Ministry of Industry and Information Technology, the average rate of profit for the steel industry was 3.5%, 2.5% lower than the average level across all industries.