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Talks over iron ore price rise unresolved

By Jiang Wei (China Daily)
Updated: 2006-04-05 07:03

China's latest round of talks with major iron ore suppliers has not yet resulted in a price agreement, despite the fact previous price levels have usually been set by April.

Talks between China's largest steel producer Shanghai Baosteel Group and major suppliers, including Brazil's Companhia Vale do Rio Doce (CVRD) and Anglo-Australian groups Rio Tinto Ltd and BHP Billiton Ltd, have so far been unsuccessful, according to a source close to the ongoing talks.

The source said the two parties were still at loggerheads and prices would remain at last year's level until a settlement was reached.

The fourth round of this year's iron ore price negotiations was launched earlier last week.

The China Iron and Steel Association criticized CVRD for making public its price demand while the talks were taking place.

A CVRD official told Reuters it was seeking a price rise of 24 per cent.

The association said the move was extremely inappropriate and in violation of rules governing international iron ore price negotiations.

"The price increase of 24 per cent requested by CVRD is not rational and cannot be accepted."

It is not clear whether the two Anglo-Australian firms are seeking similar price rises.

Chinese mills and iron ore traders accepted a 71.5 per cent rise at last year's talks, which were headed by major Japanese buyers.

Chinese Premier Wen Jiabao, on a visit to Australia, said that the price of iron ore should be dictated by market forces.

He was quoted by local media as saying: "The responsibility for governments . . . is to put in place a fair, open and reasonable market system, as well as to come up with a pricing mechanism that is in accordance with international practices."

Some Chinese government agencies predicted the growth of China's iron ore demand would slow down in 2006, while supplies would increase sharply.

The National Development and Reform Commission said the country's demand for iron ore would not increase at the speed seen over the past two years.

It was calculated that this year's growth in demand would be between 45.9 million to 58.8 million tons, it said.

China saw jumps of 75.9 million tons and 121.8 million tons in iron ore demand in 2004 and 2005 respectively.

China's moves to shut down small mills are expected to reduce the country's demand for iron ore by 60 million tons.

China is also looking for other sources of iron ore. Reports say Indian mines, which mainly supply the cash market, and eyeing long-term contracts with Chinese firms.

(China Daily 04/05/2006 page9)