Steel Prices Set to Rise as Iron Ore Talks Begin

The news emerged as the Chinese government said it was "closely watching" annual iron ore price talks and urged miners to reach a "fair" price quickly with the world's largest buyer of the steelmaking ingredient.

Baosteel Group Corp will negotiate on behalf of Chinese steelmakers, said Zhu Hongren, a spokesman for the Ministry of Industry and Information Technology. Prices should be set by market forces, he added.

China failed to reach a price agreement last year with Rio Tinto Group, BHP Billiton Ltd and Vale SA, the world's three biggest iron ore suppliers, after they rejected its demand for a cut bigger than the 33 percent offered.

China last year increased iron ore imports by 42 percent to a record 628 million metric tons as demand expanded because of its $586 billion stimulus spending. Benchmark contract prices may surge 50 percent this year, Nomura Holdings Inc forecast on Jan 11.

China wants to set iron ore prices separately from the rest of the world to exercise its bargaining power as the largest buyer, the China Iron & Steel Association (CISA) said on Oct 16.

Because the talks are a commercial matter, negotiators should stick to confidential rules and not leak any details until the result is decided, said Luo Bingsheng, CISA vice-chairman said at a media briefing.

Chinese media reported earlier that Australia's big miners, together with Japanese and South Korean steel mills, have come to a mutual agreement for a 40 percent rise in 2010's long term iron ore prices compared with the price agreed in 2009.

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