The expected iron ore price increases for 2010 are not going to significantly impact Brazilian steelmakers immediately, according to Senso brokerage analyst Antonio Carlos Goes.

Recent press reports have said that local mining giant Vale (NYSE: VALE) is negotiating price hikes of as much as 100% with its domestic and international clients.

Considering a price hike of 100% for this year, steelmakers would see production costs increase by 15-18%, Goes said.

“Besides, with steelmakers making use of their inventories, the iron ore price hikes would only be reflected in steel production from the second quarter,” he told BNamericas.

Goes added that if such increases occur, they would be gradually passed down the chain, and therefore not threaten the recovery of domestic demand.

“Domestic demand for steel is currently good, and companies are also looking to the international market to import steel for lower prices,” the analyst added.

Nevertheless, Vale will benefit from the current higher demand and market environment as in 2009, due to the global economic crisis, there were no price hikes for iron ore. “Vale will continue to favor benchmark price negotiations rather than spot prices,” Goes said.

With demand also improving in Europe and Asia, for example, steel prices will tend to see adjustments throughout the year, but they have not reached levels seen in 2007 and in the first half of 2008. “Globally, steel prices fell by as much as 50% last year,” he said.

Brazilian steelmakers Gerdau (NYSE: GGB), CSN (NYSE: SID) and Usiminas (Bovespa: USIM5) are not likely to be negatively impacted by the iron ore price hikes as the companies have invested in their own mining operations.

“Gerdau, for example, also uses scrap and buys iron ore on a smaller scale, while Usiminas has started its mining operations looking at achieving self-sufficiency for raw material supply,” Goes explained.

Both CSN and Usiminas are planning to separate their mining activities in order to add value to their iron ore operations.

Vale’s press office confirmed that the company has negotiated price increases individually with each of its clients, referring to the clarifications CEO Roger Agnelli provided during a press conference in Minas Gerais on March 19.

Agnelli, however, did not specify the rate expected for benchmark price hikes this year.

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