BEIJING, Mar. 17 -- China, the world's biggest iron ore buyer, will stick with an annual pricing system and may take action to support the country's steelmakers in negotiations with suppliers, the Ministry of Commerce said.
"We hope that suppliers, the steel association and Japanese and Korean steelmakers can together maintain the mechanism and prevent price volatility," ministry spokesman Yao Jian told reporters today in Beijing. Government support may include "trade actions," he said, without elaborating.
BHP Billiton Ltd., the world's biggest mining company, Rio Tinto Group and Vale SA are seeking pricing that covers shorter periods after spot market rates soared to more than double last year's contract agreement. Vale is seeking to raise contract iron-ore prices by more than 90 percent in negotiations with Japanese steelmakers, Nikkei English News reported March 10.
More than 10 of China's largest steelmakers, including Baosteel Group Corp. and Wuhan Iron & Steel Group, have appealed to Chinese Premier Wen Jiabao to help represent them in the iron ore negotiations, the China Securities Journal reported today.
"As the world's biggest iron ore consumers, Chinese steelmakers' interests should be appropriately reflected in the price talks," Yao said today. "Before the price is decided, it's hard to say what measures will be taken, but we do have policies in reserve."
Iron ore suppliers traditionally hold annual negotiations with steelmakers to fix benchmark prices that take effect from April 1, the start of the Japanese fiscal year. Baosteel is leading the Chinese mills in the talks with the miners.
Chinese steelmakers oppose a request by suppliers to increase annual prices for iron ore by as much as 90 percent, the China Iron & Steel Association said in a statement on its Web site today. The association agreed with an earlier rebuttal of the fee hike proposal by Eurofer, a European steel lobby group, it said.
Talks for contract iron ore prices are unlikely to finish soon as the mills can't accept a price that would force them to incur losses, Deng Qilin, general manager of Wuhan Iron & Steel Group, said on March 7.
Deng called on the government to regulate the iron ore market because smaller steelmakers have reached private agreements with the suppliers before a benchmark price agreement is reached, he said then.
The Chinese government has detained four Rio executives since July for allegedly stealing commercial secrets.