To offset the impact of the slumping steel market and reduce production costs, Taiwan’s China Steel Corp. (CSC) has joined hand in hand with mainland China’s BaoSteel Corp. to ask the world’s largest mining firms, including Vale do Rio Doce, BHP Billiton and Rio Tinto, to cut contract prices by 23% to US$140 from US$170 per metric ton.

In the meantime, CSC and BaoSteel are negotiating with the mining firms to slash shipment of iron ores by 20%.

It is said that CSC and BaoSteel have received goodwill response from the Brazil-based Vale do Rio Doce, which will help them cut production costs to weather the economic slowdown.

Steel prices worldwide have experienced the largest fall since the 2008 global financial crisis, because of the oversupply from China’s steelmakers. Recently, CSC has to slash domestic wholesale prices by 7.08% for the steel products to be shipped in January and February. The price cut shows domestic steel industry is encountering a gloomy outlook.

Institutional investors said CSC’s balance sheet in the fourth quarter of this year and the first quarter of 2012 will hinge on the outcome of the talks with foreign mining firms. A fruitful outcome in the talks will definitely benefit CSC for making profits.

At present, the three above-mentioned mining firms supply CSC with approximately 10 million metric tons of iron ore per year.