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Wuhan Iron and Steel Group, China's third-largest steelmaker, has reached agreement on the annual price of iron ore with a Venezuelan supplier.
The agreed price for 2010 will be 20 U.S. dollars less per ton than what the world's largest supplier Vale SA is charging Japanese and South Korean steelmakers in the third quarter. Wuhan Steel is set to save at least 59 million U.S. dollars under the deal, which has paved the way for China to set prices from the rest of the world. The company says it will seek to negotiate the "China price" with other countries.
In April this year, the world's top three miners, Vale, Rio Tinto and BHP Billiton, abandoned annual agreements for iron ore sales in favor of a quarterly pricing system. But Chinese steel mills prefer long-term contracts, as to secure raw material supplies and stabilizing costs.
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