Metals News
China, Oz Ties to Hold Despite Backing Mills on Price Talks
data analysis
Mar 18,2010

BEIJING, Mar. 18 -- Two key ministries have, for the first time, vowed to back Chinese steel mills in their fierce annual negotiations with international iron ore giants - but the move is unlikely to affect recovering ties between Beijing and Canberra, experts said on Wednesday.

Ministry of Commerce spokesman Yao Jian said on Tuesday that it would work with the Ministry of Industry and Information Technology to support Chinese steel mills, including adopting necessary trade measures, without revealing details.

In the ongoing negotiations for annual contracts, the price rise demanded by the major ore suppliers, namely Australia's BHP Billiton, Anglo-Australian Rio Tinto and Brazil's Vale, has soared from 20-30 percent, to 80-90 percent.

Yao said China should have a say in the pricing mechanism, as it is the world's largest consumer of iron ore.

The comments followed Australian Trade Minister Simon Crean's warning on Monday that Beijing should act as a market economy and keep out of fraught iron ore price talks between global mining companies and Chinese state-owned steel mills.

Zhang Lin, a senior analyst of, told Shanghai Evening Post that it was hard to predict what counter measures the government was likely to take.

Also Tuesday, Australian Foreign Minister Stephen Smith said Canberra's relations with Beijing, which helped Australia to stave off the worst of the financial crisis, are "back on track" after the two countries forged through a diplomatically difficult period "on the basis of mutual respect".

The iron ore price negotiations are unlikely to cast a shadow over the improving relations, said Han Feng, deputy chief of Asia-Pacific studies at the Chinese Academy of Social Sciences.

"I think the ministries are just clarifying their positions. Actually this (government intervention in iron ore negotiations) has never happened. It's a deal among the enterprises, not between the governments." And even if the dispute escalates, Han said China would only deem relations affected when its core interest is hit, such as Australia's move to permit Rebiya Kadeer, Uygur separatist, to visit last year.

Han noted that Canberra should learn from last year's lesson and avoid expanding business conflicts with Beijing to overall ties. "It is natural for two close business partners to have some disputes and to let it expand endlessly, like what Canberra did last year, is immature," he said.

"Both China and Australia should keep in mind that, even for close partners, they have to protect and manage their relationship, instead of just letting it go."

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