Baosteel uses temporary pricing to import ore

Big steelmaker studying impact of different costing mechanisms

Beijing - Baosteel, China's largest steelmaker, also the chief negotiator of the country's iron ore talks, is importing iron ore from top global miners on a temporary price basis.

Ma Guoqiang, general manager of Baoshan Iron & Steel, said car production is slowing down. [JIN RONG / FOR CHINA DAILY]

The company is also studying the impact of different pricing mechanisms and how to respond to them, said Ma.

"The pricing mechanism has seen changes. If it disappears altogether, it will have a definite impact on the company's production, operations and customers. To handle these changes, the company is conducting research into the impact of different pricing mechanisms and how to respond to them," said Ma.

China increasingly depends on imported iron ore to feed its steel mills. The top suppliers are the world's big three producers, Vale, Rio Tinto and BHP Billiton.

Until this year they sold ore at an annual benchmark price, a system that has collapsed and given way to quarterly pricing.

China's steel lobby, the China Iron and Steel Association acknowledged that Chinese steel mills have signed individual deals with global miners.

Previously, the steel lobby didn't allow Chinese steel makers to sign contracts until a national benchmark price came out.

Baosteel, which produces 50 percent of all auto-sheeting for the domestic market, is running at full capacity as supply falls short of demand.

Although the company's auto sector orders are full, he said steel demand has slowed recently after excessive growth.

Ma said car production in China is slowing down after a 50 percent gain in the first quarter.

China's first-quarter crude steel output rose 24.5 percent from a year earlier.

As prices of iron ore soar sharply, the company is trying to make long-term contracts and seeking resources investments to secure raw material supplies.