December 03, 2008

Iron ore price negotiations – China threatens to stop Australian purchase

It is reported that Mr Chen Xianwen vice chairman of China Iron & Steel Association in Beijing that both buyer and seller can not afford hostility as they are inter dependent.

Mr Chen Xianwen said that if Rio Tinto and BHP ask for higher prices, Chinese steel companies may refuse to purchase iron ore from Australia. He indicated that higher price would make iron ore from Australia lose competitiveness comparing with iron ore from Vale.

He said that “Iron ore imported from Australia takes 40% in total import volume in China, but if the price is not competitive, Chinese steel companies would not purchase iron ore from Australia and it should definitely be a great loss for Australia.”

Mr Chen Xianwen noted that Chinese steel companies are not satisfied because Rio Tinto supplies too much iron ores to spot market. He believed that it has broken obligation listed in the contract signed between each other.