China Backs Long-term Iron Ore Pricing; Urges Fairness

BEIJING, Mar. 24 -- China continues to support the annual benchmark pricing system for iron ore but opposes "any form of monopoly behaviour" that flouts market rules, a government official said on Tuesday.

Jia Yinsong, head of the raw material department at the Ministry of Industry and Information Technology, said at a briefing for domestic reporters that China supported a contract pricing mechanism that served the long-term interests of both buyers and sellers and prevented "excessive" speculation, according to state news agency Xinhua.

He said both sides should respect "the fundamental rules of international iron ore trading" and promote the healthy and sustainable development of the iron and steel sector.

Jia said that big global mining giants had asked for a huge rise in the benchmark price of iron ore, making this year's negotiations "extremely difficult" and putting the financial health of Chinese steel mills at risk.

The vice-chairman of the China Iron and Steel Association, Luo Bingsheng, confirmed last week that the world's biggest iron ore supplier, Brazil's Vale (VALE5.SA: Quote), had asked for a 90-100 percent rise in the benchmark price for 2010.

China has opposed calls by Vale and its Australian counterparts, Rio Tinto (RIO.AX: Quote) and BHP Billiton (BHP.AX: Quote), for a more flexible pricing system, insisting that annual price setting is good for the long-term interests of the industry.

It has instead blamed the three big suppliers for monopolistic behaviour and seeking "excess profit", and has also been trying to impose more unity on its own steel mills as a way of increasing their say during the negotiations.

Jia said the ministry was currently working on the implementation of new plans aimed at consolidating the fragmented steel sector and bringing order to the iron ore import market.

He added that 100 million tonnes of outdated steel capacity would be eliminated by the end of next year.