Wang, general manager of the raw material purchasing center at Baosteel’s Baoshan Iron & Steel Co., will replace Ding Shouhu, said the executive who declined to be identified because of company policy. Ding, a manager at the center, was the chief negotiator for the Shanghai-based steelmaker the past two years.

The appointment, along with a new negotiator for Rio Tinto Group, the second-largest iron ore exporter, indicates that Chinese steelmakers and miners want to start afresh after failing to agree prices last year. Chinese police have detained four Rio executives, including Australian Stern Hu, since July for allegedly stealing commercial secrets.

“Baosteel’s new negotiator faces a hard task as China has almost no bargaining power,” said Hu Kai, a Shanghai-based analyst with researcher Umetal.com. “China hasn’t even agreed to 2009 benchmark prices.”Baoshan Steel shares dropped 0.3 percent to close at 8.68 yuan in Shanghai. Rio’s shares closed 0.7 percent lower at A$78.62 in Sydney.

Wang and Chen Ying, vice president of Baoshan Steel, didn’t return calls seeking comment. Wang was a deputy general secretary of the China Iron and Steel Association in 2005 and 2006, according to the association’s Web site. The association had led the unsuccessful price talks last year.

Chinese Demands

The four-decade annual iron ore pricing system was fractured last year after Rio, BHP Billiton Ltd. and Vale SA, which together account for three quarters of traded iron ore, refused to meet China’s demand to cut prices by more than 33 percent during the global recession.

China is the world’s largest buyer of iron ore and last year increased imports by 42 percent to a record 628 million metric tons. Benchmark prices may surge 50 percent this year as the economy rebounds, Nomura Holdings Inc. forecast Jan. 11.

The Chinese police investigation into the Rio executives was completed this week, with the case now referred to prosecutors, both the Australian and Chinese governments said.

The arrest of Hu, the head of Rio’s iron ore unit in China, strained ties between Australia, the world’s largest exporter of iron ore, and China, its largest trading partner.

London-based Rio Tinto appointed Danny Goeman as the new negotiator with Asian steelmakers, reporting to Will Malaney who was the company’s chief negotiator, a spokesman said in December.

China Price

Rio needs to hear from China “as to exactly what their view is in relation to prices,” Sam Walsh, chief executive officer of the company’s iron ore unit, said Nov. 2.

China wants to set iron ore prices separately from the rest of the world to exercise its bargaining power as the largest buyer, the China Iron & Steel Association said Oct. 16. Annual contracts for China should start from Jan. 1, instead of April 1, the current practice, the association had said.

Cash prices of 62 percent iron-content ore delivered to Tianjin port in China last week climbed to the highest in at least 13 months, according to the Steel Index. Prices had jumped amid “panic buying” by Chinese mills concerned about the availability of cargoes from Australia, Goldman Sachs JBWere Pty. said.

The China Iron and Steel Association has said that China’s position in the talks has been weakened because local steel mills — especially smaller operators — have failed to form a “united front” against the miners.

However, the consolidation process has so far been slow, with provincial governments reluctant to accept plans that would reduce local capacity and eat into tax revenues.

In an effort to step up efforts, the Ministry of Industry and Information Technology said in a draft policy document released last month that steel firms with production capacity of less than 1 million tonnes per year would be eliminated from the sector this year.

Beijing will also raise environmental standards on steel mills, forcing them to upgrade their equipment or have their licenses revoked, another way of trying to impose “order” on the sector, the ministry said.

Both the ministry and CISA have said that restructuring will be the “priority” for the sector in 2010.

Prices were kept level for most flat products, including hot-rolled, cold-rolled, zinc-galvanized sheets and silicon steel, from January, the Shanghai-based steelmaker said today in a statement on bsteel.com.cn, its trading Web site.

“The market has widely expected that Baoshan would raise prices for February,” said Luo Wei, a Shanghai-based analyst with China International Capital Corp. “Baoshan made such a decision probably because the government is tightening.”

China raised the proportion of deposits that banks must set aside as reserves this month, faster than economists expected, as record lending threatens to stoke inflation and create asset bubbles.

Rising steel demand prompted Baoshan Steel to raise some prices for January by 8 percent, the first gain since September.

Baoshan Steel shares rose 0.6 percent to close at 8.71 yuan in Shanghai. The benchmark Shanghai Composite Index gained 1.4 percent.

Chinese steel prices have surged 18 percent since Oct. 15, a low in 2009, as the government’s $586 billion stimulus spending boosted demand, and manufacturers and traders ran down inventories.

As an indicator for the steel market, the Baosteel Group Corporation (Baosteel) has raised January 2010 iron ore prices.

After the price adjustment, the main product prices of Baosteel have basically returned to their high level in 2009. The action was followed by Wuhan Iron and Steel (Group) Corp. (WISCO), Anshan Iron and Steel Group and other enterprises increasing their steel prices.

However, India witnessed another phenomenon this week when JSW Steel, India’s third largest maker of steel, has cut prices for flat products by Rs 500 a tonne in December.

Flat products are used in manufacture of automobiles and consumer goods such as refrigerators and washing machines. JSW has said it sees steel prices to be stable with an upward bias in 2010Baosteel said next year in terms of steel demand and the overall price, the situation will be greatly improved compared to this year, but the overcapacity issue will remain.

Next year’s domestic production capacity of the company may surpass 600 million tonnes. The company expects that next year China’s economic growth will rely more on domestic demand and growth in investment will be less than this year. Based on this premise, combined with reduction in vehicle purchasing tax and the possibility of continuing the home appliances to the countryside policy, the outlook for steel demand is optimistic.

Furthermore, as urbanization continues to advance, the demand for steel will be diversified, which will generate a new round of domestic steel demand. Relatively speaking, with the cooling down in investment in infrastructure, construction steel demand growth will slow in 2010.

Market analysts hold that as the economy is growing steadily after a period of rapid revival. The steel industry will not go through sharp ups and downs, but is likely to enter a correction stage.

By last week, domestic steel prices had dipped for six straight weeks. However, the decline in the past three weeks has been narrowing, with rebar prices only edging down 10 yuan/ton a week on average.

Analysis of the industry information provider MySteel.com said that the building steel prices went down about 50 yuan/ton at most last week, with the decline smaller than the previous week.

However, a total of 13 rebar enterprises and 15 wire rod firms adjusted their prices last week, which indicates that the steel market has not yet stabilized.

Medium steel plate prices have been dropping but will post a smaller decline in the immediate future. The prices of hot-rolled and cold-rolled steel products will continue to correct.

According to a survey on the domestic steel mills and traders, more than a half held that the steel market would be dominated by correction in the coming period.

The Shanghai building steel market recorded an increase in stocks by 10 weeks running. A report by the China Iron and Steel Association said that in August, the steel stocks in the country’s major markets increased more than 15 percent over the previous month, and hit the second highest point of the year.

However, increasing steel demand from construction projects and restocking before the coming weeklong holiday have lent some support to the steel market.

Wang Jianhua, an analyst with MySteel, noted that the high stocks and a stable demand would exert a combined effect on the steel market.

Meanwhile, although steel prices have been falling persistently, steel plants are still unwilling to cut output as they can still make moderate profits at the current prices.

In the first 10 days of September, China’s crude steel output was estimated to be about 16.66 million tons. Daily output was about 1.66 million tons, down only 20,000 tons from last month.