China Is 'Closely Watching' Contract Iron Ore Talks (Update1)

Jan. 27 (Bloomberg) -- The Chinese government said it is "closely watching" annual iron ore price talks and urged miners to reach a "fair" price quickly with the world's largest buyer of the steelmaking ingredient.

Baosteel Group Corp. will negotiate on behalf of Chinese steelmakers, Zhu Hongren, a spokesman for the Ministry of Industry and Information Technology said, according to a transcript of a press conference on its Web site. Prices should be set by market forces, he also said.

China failed to reach a price agreement last year with Rio Tinto Group, BHP Billiton Ltd. and Vale SA, the world's three biggest iron ore suppliers, after they rejected its demand for a cut bigger than the 33 percent offered. Chinese police have detained four Rio executives since July for allegedly stealing commercial secrets of the steel industry.

"We hope the suppliers should think long term and reach a fair and acceptable price as soon as possible," Zhu said.

China last year increased iron ore imports by 42 percent to a record 628 million metric tons as demand expanded because of its $586 billion stimulus spending. Benchmark contract prices may surge 50 percent this year, Nomura Holdings Inc. forecast Jan. 11.

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.

Baosteel, China's biggest steelmaker, and Rio, the second- largest iron ore exporter, have each appointed a new negotiator for this year's talks.