China steelmakers working on lower ore price

China's steel industry body is still looking for a lower iron ore price in negotiations with key suppliers, the president of Baosteel said on Saturday, adding that national output was running high in July.

Xu Lejiang of Baosteel, one of China's dominant steelmakers, was tightlipped with reporters about the tense negotiations over ore prices. But he said the China Iron & Steel Association (CISA) was still working on a lower price for the nation's steelmakers.

"CISA is still working on a lower iron ore price," Xu told reporters on the sidelines of a meeting.

He also said that China's steel production in July looked set to remain at the high levels in reached in June, and national production for all 2009 could reach 500 million tonnes.

"July is still high, just like June, because steel demand from construction is strong, and also this is the high season for steel demand," he said.

Demand from building projects and vehicle makers was shoring up the nation's appetite for steel, he said.

Major Chinese steelmakers under the China Iron and Steel Association reported a total profit of 1.3 billion yuan ($190.3 million) in May, after losing money for seven months, the industry group said early this week.

China's steel output hit 1.522 million tonnes per day in June 11-20, the highest daily output this year, according to data from CISA earlier obtained by Reuters.

Steel prices in China have awaited cues from iron ore price negotiation with global major miners, with China seeking to pay less for imported iron ore this year than other countries.

But China's hard-headed handling of the iron ore price talks may pave the way for more spot deals and fewer annual contracts next year, as frustrated steel mills seek to break with the trade body that has led negotiations to deadlock, analysts have said.

Industry observers have said there was little support for CISA's hardline attitude, which has stymied talks that started last year, and may prompt the country's steel mills to quietly sign individual deals with miners this year.

Last month saw a deadline for some annual contracts pass without settlement, but a spokesman for Rio Tinto, which has been in the vanguard for this year's settlements, has said talks with mills continued.