(Adds comment from steel analyst in fourth paragraph.)
Nov. 18 (Bloomberg) -- China Steel Corp., Taiwan’s largest producer, is in talks with BHP Billiton Ltd., Rio Tinto Group and Vale SA to delay or cut iron ore and coking coal deliveries as lower output reduces raw-material needs, an official said.
The company is either canceling shipments or deferring deliveries, said the official, who declined to be identified, citing company policy. The market isn’t good, the official said yesterday.
The Taiwanese company joins mainland Chinese rivals in cutting production amid concerns a global economic slowdown may curb steel demand from automakers and builders. Iron ore prices for immediate delivery to China fell 31 percent last month, as mills seek to replace quarterly contracts with shorter pricing agreements. BHP, Rio Tinto and Vale control about 67 percent of the total seaborne trade, according to Bloomberg Industries.
“You don’t see it any numbers why they should be doing this, but they must see something,” Ken Hoffman, a Princeton, New Jersey-based Bloomberg Industries steel analyst, said in a telephone interview. “Either it’s orders are flat and they’ve built up way too much inventory of ore expecting a boom that didn’t come, or they’re seeing some numbers that we don’t have access to that show some sudden cooling.”
Kaohsiung-based China Steel may reduce output by as much as 20 percent in December as orders for the month decline, the Taipei-based Commercial Times reported Nov. 5, citing an unidentified official at the mill.
--Helen Yuan, Chinmei Sung, with assistance from Joshua Fellman in Shanghai. Editors: Simon Casey, Joshua Fellman
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