* 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 (Reuters) - 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 Wednesday.
“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 on sales.”
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.”
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 price-taker. [ID:nSGE68R0AK]
Martins said he saw no need to incorporate steel prices into iron ore pricing, since the two markets have different supply and demand dynamics.
“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)