Posted on 04/04/2008 3:23:28 AM PDT by TigerLikesRooster
China steelmakers warn Australian miners of 'revenge': report
Fri Apr 4, 2:37 AM ET
China's top steelmakers' association has warned that Australian mining companies could face "revenge" over the aggressive pursuit of higher prices for iron ore, a report said Friday.
"Buyers and sellers should not be hostile -- they should be interdependent," the deputy director-general of the powerful China Iron and Steel Association, Chen Xianwen, told the Australian Financial Review.
"(But) if you have been aggressive, you can experience revenge in the future," Chen said in an interview in Beijing.
The comments come as Anglo-Australian mining giants BHP Billiton and Rio Tinto have reportedly dismissed as too low a 65 percent increase in annual contract prices agreed to by Brazil's Vale.
Chen warned that if Rio and BHP were able to extract higher prices China's steel industry could turn away from Australia even though many mills were desperate for supplies, the Financial Review reported.
"This is a big if, but if Australia succeeds in getting a freight premium and the price of Australian iron ore increases a lot, this would mean that Australian iron ore is not as competitive as Brazilian iron ore," Chen said.
"Australia accounts for 40 percent of China's iron-ore imports. But if Australian iron ore is not as competitive, steel mills won't buy from Australia. This will be a heavy loss for Australia."
Australian media reported last month that BHP and Rio had been barred from selling iron ore on China's daily spot market, where they get higher prices than through long-term contracts.
Chen said China's steel industry was angered by Rio's decision to divert more of its iron ore to the spot market, which he claimed had breached the company's contractual obligations.
"Because of that, the mills would like to boycott this dishonest company," he said, stressing that the decision by some mills and traders to reject spot cargoes had been taken independently of the association.
A spokesman for Rio Tinto denied that the company had breached its contractual obligations, the Financial Review reported.
Ping!
I own stock in Brazil’s Vale. Formerly known by the full name Companhia Vale Do Rio Doce. It trades under the symbol RIO on the NYSE. What a fantastic company and my gosh what a run it has been on. Doubling every year for the past 5 years. They are the world’s larges iron ore miner along with nickel, alumina, copper, all sorts of metals. They negotiated the 65% iron ore increase with China and other steel makers around the world. The increase just went into effect April 1. BHP and Rio Tinto are holding out for a better than 65% increase and are squeezing the Chinese.......I believe that to be a long term mistake, the inscrutable Chines may end up paying now, but indeed when the time is right, their revenge will be sweet.
Iron ore, by the way is one of only a small group of materials that is not traded on commodities exchanges, it is on a negotiated price that is set for the fiscal year April to April. Vale has gotten 65% increase this year, 17% last year, 10% in 2006 and another whopping 55% in 2005. Yet on top of these increases, spot scrap steel from India being sold to the Chinese is still 30% or more higher, this being the reason BHP and Rio Tinto are holding out for something more on the order of the Indian spot market.
Revenge???...like lead paint on children’s toys, toxins in pharmaceuticals, poisons in pet food and God knows what else??
Gee, that sounds like a threat.
One word: inflation. The Chinese may soon realize this and be forced to raise their prices as well. They're banging on their supplier(s) not to raise prices since their economey is already pegged to the dollar and should be somewhat protected from US-based inflation.
In any event it's good to see the Chinese are serious about keeping the cost of raw materials down -because the U.S. is their greatest customer.
And if you invade Australia like Japan did? We've got nukes.
Cheers!
Imagine China threatening OPEC with revenge. It’s going after Australia because it sees Australia as this puny little country within its reach. The Chinese are really feeling their oats, aren’t they?
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