* Sees demand slowing for 2-3 months before revival
* Sees little impact from China's power usage crackdown
* Dismisses CISA idea that steel should set ore prices
By Ruby Lian and Lucy Hornby
DALIAN, China, Sept 29 Steel demand growth in
China, the world's biggest steel market, will revive by early
2011, Jose Carlos Martins, executive director of ferrous metals
at the world's top iron ore miner Vale (VALE5.SA), said on
"I see demand slowing for two or three months, then growing
again. We need to prepare for growth again by the end of 2010 or
in early 2011," he told reporters on the sidelines of a
conference in Dalian, a major Chinese port.
Chinese steel demand appeared to waver in recent months after
the government took steps to dampen the property market and there
was a hint of slower expansion in China's car industry.
But Baosteel (600019.SS), a top Chinese steel mill, said
earlier this month it would raise its widely watched prices in
October, signalling an apparent tightening in the market.
That may have been because China's steel supply has slipped
along with its demand. Government efforts to hit a five year
energy-saving target that expires at the end of 2010 have
prompted a crackdown on power-hungry steel mills, trimming
production in several provinces.
Crude steel production peaked in May and slowed for each of
the next three months to 51.6 million tonnes in August, the first
month to record a year-on-year fall since April 2009.
But Martins played down the significance of the moves to cut
steel mills' power usage.
"The impact is not so big," he said. "Iron ore demand is
good, customers are taking their volumes, we have seen no impact
Vale has not pushed back investment plans due to the recent
slowdown, he said.
"We've been going full blast since last year. We don't intend
to stop because once in a while the market stops a little bit to
take a breath."
China is the world's biggest market for iron ore and Vale is
the biggest supplier globally, followed by Rio Tinto (RIO.AX) and
BHP Billiton (BHP.AX), which ship ore from Australia.
The three companies control two-thirds of the total seaborne
iron ore trade, making them easy targets for rhetoric from the
China Iron & Steel Association (CISA), which is determined to
gain the upper hand in negotiations over price of imported ore.
On Tuesday CISA Secretary General Shan Shanghua said iron ore
prices should be based on steel prices, implying China's huge
steel sector would become the price-maker instead of the
Martins said he saw no need to incorporate steel prices into
iron ore pricing, since the two markets have different supply and
"It doesn't make sense," he said.
The Dalian conference would normally mark the start of annual
iron ore pricing negotiations, but the decades-old system of
annual pricing collapsed last year. Pricing iron ore on a
quarterly basis, which began this year, was working and
acceptable, he said.
"For the time being, we do not see the need to sell on spot
as long as customers are fulfilling their commitment with us."
(Editing by Ken Wills)