Nippon Steel's decision to agree to a 33-per cent price cut in the annual contract price for ore from Rio Tinto, has rankled Chinese steelmakers, who have been holding out for a minimum 40-per cent reduction, in view of the decline in global demand and prices.
China feels by Nippon Steel's decision could undermine its own ongoing negotiations with leading global miners for the annual contract price for iron ore.
The world's second largest iron ore miner, Rio Tinto's subsidiary Hamersley Iron yesterday reached an agreement with Nippon Steel Corporation, the world's second-largest steelmaker on the annual contract price for Hamersley iron ore with a 33-per cent cut in the contract price of fine ore and a 44-per cent cut in lump ore.
The agreement has angered the Chinese steelmakers, with its trade body, China Iron and Steel Association (CISA), threatening to reject the price cut deal.
Last month, Chinese steel producers and CISA failed to reach an agreement on the amount of the price cuts with world's three mining giants Vale of Brazil, BHP Billiton and Rio Tinto in order to fix this year's long-term iron ore prices. (See: Global iron ore miners locked in pricing battle with China)
In wake of the plunging demand for steel, Chinese steelmakers are seeking price cuts of over 40 per cent on the annual contracts while miners had been unwilling to budge beyond 20 per cent.