China bypassed in annual iron ore negotiations
2010-01-13 13:24:37Source:Global TimesAuthor:
Top global iron ore miners are negotiating this year's annual contract price with Japan ahead of China, the world's largest iron ore consumer.
Vale of Brazil, Rio Tinto and BHP Billiton of Australia, the world's top three iron ore pro-ducers, are negotiating with Japanese steel makers to reach a long-term contract price for the 2010 iron ore supply, which they will then present to Chinese buyers to "take or leave," according to a Financial Times report Tuesday.
So far the miners have not started talks with China's negotiating body, State-owned Baosteel, and have no plans to initiate negotiations.
"As far as I am concerned, they [the Chinese negotiators] could come over to Australia if they want to talk," said a mining executive, quoted by the Financial Times.
"It is no surprise that miners made the move," said Guo Cunmin, a Hainan-based steel consultant. "China did overdo last year's iron ore negotiations, which scared the miners away."
Guo mentioned China's detention of Rio Tinto China manager Stern Hu and three Chinese employees of the Australian miner in July after last year's iron ore negotiations broke up.
"The miners are pushing up the spot price by limiting their supplies before the negotiations," said Li Wanxiong, an analyst with Shanghai-based Steel Business Briefing (SBB). "That is also negative for China to get the price it wants."
The spot price of iron ore has been rising from around $80 per ton in late October to about $130 currently, up 90 percent from the long contract price of $61 per ton miners agreed on with Korean and Japanese steel makers, according to SBB.
China, which used more than half of global ore imports last year, is encouraging private companies to seek natural sources overseas.
Rixin, a Guangdong-based privately-owned enterprise, acquired 70 percent of the mining rights in late December to a deposit of iron ore in Chili with estimated reserves of 3-5 billion tons.
Additionally, a Henan-based prospector has recently uncovered a reserve of about 4 billion tons in Western Africa, and has total ownership of the deposit.
"In two or three years, the overseas mines owned by China investors will make up a weighty part of the country's imports and the country will have more bargaining power against the three iron ore giants at that time," Guo said.
The country's Ministry of Land Resources predicted in a report that the 2010-11 long contract price would rise 10-20 percent, while JPMorgan also forecast in late December that the price would increase about 20 percent in 2010 and 30 percent in 2011.
Vale of Brazil, Rio Tinto and BHP Billiton of Australia, the world's top three iron ore pro-ducers, are negotiating with Japanese steel makers to reach a long-term contract price for the 2010 iron ore supply, which they will then present to Chinese buyers to "take or leave," according to a Financial Times report Tuesday.
So far the miners have not started talks with China's negotiating body, State-owned Baosteel, and have no plans to initiate negotiations.
"As far as I am concerned, they [the Chinese negotiators] could come over to Australia if they want to talk," said a mining executive, quoted by the Financial Times.
"It is no surprise that miners made the move," said Guo Cunmin, a Hainan-based steel consultant. "China did overdo last year's iron ore negotiations, which scared the miners away."
Guo mentioned China's detention of Rio Tinto China manager Stern Hu and three Chinese employees of the Australian miner in July after last year's iron ore negotiations broke up.
"The miners are pushing up the spot price by limiting their supplies before the negotiations," said Li Wanxiong, an analyst with Shanghai-based Steel Business Briefing (SBB). "That is also negative for China to get the price it wants."
The spot price of iron ore has been rising from around $80 per ton in late October to about $130 currently, up 90 percent from the long contract price of $61 per ton miners agreed on with Korean and Japanese steel makers, according to SBB.
China, which used more than half of global ore imports last year, is encouraging private companies to seek natural sources overseas.
Rixin, a Guangdong-based privately-owned enterprise, acquired 70 percent of the mining rights in late December to a deposit of iron ore in Chili with estimated reserves of 3-5 billion tons.
Additionally, a Henan-based prospector has recently uncovered a reserve of about 4 billion tons in Western Africa, and has total ownership of the deposit.
"In two or three years, the overseas mines owned by China investors will make up a weighty part of the country's imports and the country will have more bargaining power against the three iron ore giants at that time," Guo said.
The country's Ministry of Land Resources predicted in a report that the 2010-11 long contract price would rise 10-20 percent, while JPMorgan also forecast in late December that the price would increase about 20 percent in 2010 and 30 percent in 2011.
