Steelmakers brace for higher import costs after Japanese firms agree to increase Higher iron ore prices are expected to affect mainland steelmakers this year, despite the possibility that some might be able to bargain for a lower price increase than their Japanese counterparts. Gu Jianguo, chairman of H share Maanshan Iron & Steel, said the firm was in negotiations with Australian and Brazilian suppliers. However, he said he expected a slightly lower increase than the 18.6 per cent accepted by Japan's largest steelmaker Nippon Steel for ore from Australian giants Rio Tinto and BHP Billiton. Brazil's Companhia Vale do Rio Doce and the two Australian firms are the world's top iron ore producers and together dominate the global market. Mr Gu said Maanshan's parent owned domestic iron ore mines and, coupled with the fact that the mainland was now the world's largest iron ore importing country, had a stronger bargaining power. While he admitted the quality of mainland iron ore was not as good as imported ore, he said some of Maanshan's demand could be replaced by domestic supply should import costs rise too much. Maanshan imports 60 per cent to 65 per cent of its iron ore needs. China's largest steel producer, A share Baoshan Iron & Steel, is expected to be hit harder due to its heavier reliance on ore imports, although its parent has joint-venture mines in Brazil and Australia. Fellow H share Angang New Steel imports less than half its needs as its parent has domestic ore mines. Based on Maanshan's estimated iron ore import volume of about four million tonnes this year, Daiwa Securities metals and mining analyst Geoffrey Cheng said the company could see additional costs of almost 200 million yuan. This is assuming its iron ore import cost rise turns out to be the same as Nippon Steel's. Maanshan is forecast by UOB Kay Hian and Deutsche Bank to post a net profit of about 22.5 billion yuan for last year based on their December estimates, according to Thomson First Call. What is less certain is the degree to which mainland steel mills can shift additional costs to customers. Mr Cheng said some steel mills had already raised steel product prices at the start of this year. Mr Gu estimated China would import 160 million tonnes of iron ore this year.