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| China-Japan-Koreas | |
| China gags on iron ore price | |
| 2006-05-21 | |
| CHINA says its steel industry cannot afford the 19 per cent price increase secured by Australian and Brazilian producers for shipments of iron ore in 2006-07. The government-owned China Daily said the US dollar price rise - it follows a 71.5 per cent increase last year - could end the resources boom. China has fast become the biggest market for Australian iron ore with an annual value of about $4 billion, making the health of the steel-making industry there a key consideration for the leading exporters, the Pilbara operators BHP Billiton and Rio Tinto. "When over-capacity is looming in China's steel industry, rising ore cost that further bites into domestic steel makers' profits could turn the current boom into a bust and no one will benefit," a China Daily editorial said. And China's Iron and Steel Association said its steel makers and their iron ore suppliers, including BHP and Rio, "still differ" on price and negotiations would continue. An emergency meeting of 16 Chinese steel makers in Beijing on Friday was held in an effort to ensure a united front in China's opposition to the price rise - one that the rest of the global steel-making industry accepts as the new benchmark. That was underlined by an announcement from Rio Tinto's Hamersley Iron subsidiary at the weekend that it had reached agreement with South Korea's Posco for a 19 per cent price increase for shipments of its Pilbara lump ore. The chief executive of Rio's iron ore operations, Sam Walsh, said the agreement with Posco, the world's No.4 steel maker, confirmed the "tightness of the iron ore market and the very strong demand for Australian iron ore". China's hopes of securing an increase of no more than 10 per cent were dashed last week when the world's biggest producer, CVRD, effectively set the new benchmark by agreeing to a 19 per cent price rise with Germany's ThyssenKrupp. The Chinese have argued since that the CVRD deal is not a global benchmark. The Australian Government's chief commodity forecaster, ABARE, predicts world seaborne trade in iron ore could rise 7.6 per cent to 706 million tonnes in 2006. China's booming economy would account for about 44 per cent of the total, up from 28 per cent in 2003. Expansion by BHP and Rio is expected to underpin a 17 per cent surge in Australian exports to 282 million tonnes in 2006, worth about $14 billion. Meanwhile, India is moving to curb its iron ore exports, adding strength to the Australian push for China to pay more for the commodity. India's Steel Ministry has called on the Ministry of Commerce to curb exports so the interests of the domestic steel industry are protected. Exports from the country are not great but their removal from the global market to feed its booming domestic industry would tighten overall supply.
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| Posted by:john |
| #5 I agree chuck. And in twenty years, there won't be enough Russians left to stop them. |
| Posted by: DarthVader 2006-05-21 23:19 |
| #4 As I suggested in the third part of my series on China, What the Future May hold, the Russian Far Est will be their target. Russian Far East, ChinaÂ’s Land of Plenty |
| Posted by: Chuck Simmins 2006-05-21 21:31 |
| #3 Non-renewal commodity dependence can really be a back breaker, especially with metals. In the US, the metal markets have been totally controlled by insiders for many years. Insiders who rigidly control production and price. The US government encourages them to do this specifically to prevent situations like this. Metals and non-metal ores not produced in the US in quantity are always under intense observation, and appropriate strategic stockpiles are always maintained. It is good to remember the tale of Nelson Bunker Hunt (wikipedia). |
| Posted by: Anonymoose 2006-05-21 20:44 |
| #2 China was hoping to use what it felt was its monopsony power as a big buyer of commodities to get a better price than other buyers in the market. It should be interesting to see if they succeed in doing so. At the same time, Chinese companies need the stuff. They can't function without it. Iron ore producers can idle some of their capacity without bringing everything to a halt. My feeling is that the Chinese will have to cave or bring their economy to a halt. |
| Posted by: Zhang Fei 2006-05-21 19:54 |
| #1 Economic Superpower huh? |
| Posted by: john 2006-05-21 19:31 |