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BEIJING -(Dow Jones)- The upside for iron ore benchmark prices remains "small" and "difficult," a senior China Iron and Steel Association official said Tuesday.
"The next round of negotiations hasn't started yet, and the two sides haven't met, but the situation of supply surpassing demand is still in effect, and the upside for price increase is small," said Vice Chairman Luo Bingsheng, according to a recording of a briefing for local media obtained by Dow Jones Newswires.
China is poised to enter the 2010-11 round of negotiations with major miners BHP Billiton Ltd. (BHP), Rio Tinto Ltd. (RTP) and Vale S.A. (VALE) on annual iron ore term prices.
This year's talks collapsed without a result, and Rio Tinto employees are still being held on Chinese charges of commercial spying over the pricing process.
"What the next step is, we need to negotiate," Luo said. "The basic fact of iron ore supply outstripping demand isn't going to change. We can only say the 2010 round is at a prologue. We hope both sides can achieve a win-win outcome."
Luo's remarks on prices, which didn't rule out a price hike, appear to be a defter response to trial balloons floated by miners ahead of the new contract year's negotiations, compared with last year's grandstanding insistence on a large price cut.
Among other proposals, Rio Tinto iron ore chief Sam Walsh was quoted in Australian media Tuesday as saying a "China price," meaning a special pricing mechanism for the country, could be a possibility.
In a statement distributed at the conference, later obtained by Dow Jones, the association said it expected demand to improve in the fourth quarter and early next year.
But it also said high iron ore import volumes continue to pose a threat to fundamentals. In the year to September, iron ore imports reached 123.3 million metric tons, exceeding actual demand by 66 million tons.
"This sort of large excess is a disruption of orderly trade. It's causing a large rise in inventories and congestion at ports."
-By Chuin-Wei Yap, Dow Jones Newswires; 8610 8400 7704; chuin-wei.yap@dowjones.com