South Korean steelmakers have urged their Japanese peers to join them in opposing price increases for iron ore and coal, after moves by the world's leading mining groups to switch to short-term contracts. About 50 government and industry officials from the two countries held their eleventh annual steel meeting in Tokyo where they expressed concerns about iron ore suppliers' move to drop a 40-year-old annual pricing mechanism in favour of shorter-term deals based on the spot market.
Steel mills in Japan, China and Europe have accused the three big iron ore producers – BHP Billiton, Rio Tinto and Brazil's Vale – of abusing their market dominance. The new pricing system will see the commodities' costs nearly double in the short term, which could raise steel prices by up to a third.
Vale, Rio and BHP control nearly 70 per cent of the sea-borne iron ore market. South Korea's Ministry of Knowledge and Economy said “sharp increases of raw material prices would lead to an increased cost burden for major industries such as automobiles, shipbuilding and electronics as well as steel making”.