By Gong Zhengzheng (China Daily)
Updated: 2007-08-15 06:57

Steel mills from China, the world's largest iron ore consumer and importer, say they expect raw material prices to remain stable next year, as negotiations with major global suppliers draw near.

Shen Wenrong, chairman of Shagang Group, the country's fourth-biggest steelmaker, said yesterday there is no reason for a further hike in iron ore prices next year.

"Local steel companies should boycott any sharp price rise manipulated by iron ore suppliers," Shen said.

Zhu Jimin, general manager of Shougang Corp, the No 9 steel mill in China, said iron ore prices next year should keep to the 2007 level thanks to "a basic balance" between supply and demand in the world.

Industry representative Baoshan Iron & Steel Corp will start talks on iron ore prices for 2008 in November with the world's top three suppliers - CVRD, BHP Billiton and Rio Tinto, a source from the China Iron & Steel Association said.

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A slew of global investment banks recently forecast iron ore prices would continue to rise next year boosted by strong demand from China, the world's largest steel producer. UBS last month said next year's prices will jump by 25 percent.

But Shen said: "If iron ore prices shot up next year, we would have to raise steel prices. And that would hurt steel consumers."

The top three suppliers, which control three-quarters of the global iron ore trade, last year upped prices by 9.5 percent following a 19 percent increase in 2006 and a 71.5 percent surge in 2005.

China's iron ore imports grew by 19 percent year-on-year to 222 million tons in the first seven months of this year, according to Customs.

The steel association said last month that full-year imports would hit 367 million tons, up 12 percent.

Supplies from local mines are also growing rapidly. First-half iron ore production in China climbed by 28 percent to 321 million tons.

This year's local production was forecast to be 710 million tons, up from 540 million tons.