Wuhan Iron & Steel Group, China’s third largest steelmaker, has signed a long-term iron ore supply contract with Corporacion Venezolana de Guayana, the only iron ore producer in Venezuela. The move is designed to help the Chinese company diversify its raw material sources.

Wisco said it would buy the iron ore using a different pricing mechanism from benchmark prices set each year by the world’s top three producers, although it didn’t explain how the mechanism would work.

An analyst at a domestic consulting firm told China Daily that the deal was in line with domestic steelmakers’ strategy to find new sources of iron ore. Xu Xiangchun, executive director of Mysteel, said it was easier for domestic companies to negotiate with smaller producers on prices.

This year, Chinese steelmakers have failed to reach a price agreement with suppliers Rio Tinto, BHP Billiton and CVRD. The three producers account for 75 per cent of the global sea-borne iron ore trade.

China’s iron ore imports in October fell 30 per cent over the previous month to 45.47m tons, according to statistics released by the General Administration of Customs. However, the level was 49 per cent more than in the same month of last year.
Market analysts attributed the month-on-month plunge in October iron ore imports to a decline in steel prices in August and September. However, they believe import levels will rebound as a result of higher iron ore prices that have been rising since mid-October.