POSCO, Nippon Steel to team up in iron ore talks

Seoul, Dec 11: South Korea's POSCO said on Monday it will work together with Japan's Nippon Steel Corp. in negotiating iron ore prices in order to strengthen the steel makers' buying power.

The tie-up between the world's No. 2 and No. 3 steel producers comes before talks this month with iron ore producers, who are seeking another big price increase in 2007.

Iron ore producers secured a 19 percent increase in 2006 and a 71.5 percent leap in 2005 because of strong demand from China.

Chinese mills account for nearly half of the global steel output.

''We have decided to cooperate in negotiating the annual iron ore talks and in studying the raw material market, as the supply of iron ore has been tightened and prices have soared due to Chinese demand,'' POSCO said in a statement.

''The ties with Nippon Steel will stabilise the purchasing process of iron ore.'' The annual talks between global steel makers and iron ore producers normally conclude before April 1, an informal deadline in price contracts with Asian steel makers.

In the past, a benchmark price deal was usually struck with a major Japanese steel maker, which other producers accepted. But more recently, Chinese buyers have been seen as a market bellwether because of their huge demand for iron ore.

The latest move between Nippon Steel and POSCO strengthens their alliance as speculation about consolidation has swept the industry after Mittal Steel's unsolicited takeover bid led to the creation of Arcelor Mittal, the world's biggest steel company.

In October, Nippon Steel and POSCO announced measures to expand capital and business ties. They will each spend about 0 million to raise their stakes in each other by 2 percent, becoming the top shareholder in each other.

They will also supply semi-finished products to each other at times of plant repairs.

Early this month, Nippon Steel said it was asked to agree cross-shareholding with China's biggest steelmaker Baosteel Group Corp., the world's No. 5.

Japanese business daily Nihon Keizai reported last month that Baosteel may also ask POSCO to buy shares in it.

Reuters