China Iron & Steel Association
On behalf of the 21 Chinese steel enterprises who inked the long-term iron ore supply contracts for year 2007 with Rio Tinto (22 enterprises for 2006), we issue the following statement:
1. For year 2006, 22 Chinese steel enterprises signed the long-term iron ore supply contracts with Rio Tinto, which stipulated the supply of 54.81 million mt of iron ore. However, but the actual supplied quantity was 48.4629 million mt, representing a contract fulfillment rate of 88.42 percent. In addition, the fulfillment rates of two mills were even below 80 percent, the lowest being just 72 percent.
2. For year 2007, 21 Chinese steel enterprises signed the long-term iron ore supply contracts with Rio Tinto, which stipulated the supply of 60.73 million mt of iron ore. However, the actual supplied quantity was 52.3733 million mt, representing a contract fulfillment rate of merely 86.24 percent. This time, seven mills registered fulfillment rates of lower than 80 percent, with the lowest being 53.17 percent.
3. Since the fourth quarter of 2007, against the background of the excessively low levels of fulfillment of the supply contracts to China, Rio Tinto has claimed to have 15 million mt of iron ore available for the spot trading market. On one hand, Rio Tinto notified the Chinese steel enterprises in writing that due to force majeure they did not have enough iron ore supplies and were not able to guarantee the 100-percent execution of the long-term contracts. On the other hand, Rio Tinto put a great number of iron ore supplies on China's iron ore spot market, thus generating suspicions that this company has been intentionally reducing the fulfillment rate of long-term contracts in order to transfer part of its iron ore supplies from long-term trading to spot trading, in a bid to seek greater profits.
4. We think that it is the basic responsibility and obligation for a company involved in international trading to seriously fulfill the supply contracts signed with other parties, and that this is also a basic requirement for a company's standards of honesty and trust. If a company fails to fulfill a supply contract it has signed, this should be deemed as a form of dishonest behavior on the part of the company.
5. The Chinese steel enterprises have had a good and friendly cooperative relationship with Rio Tinto over a long period, contributing to the maintenance of normal order in global iron ore trading. We appeal to Rio Tinto to treasure the long-term friendly relationship between the two parties and to conscientiously execute the long-term supply contracts signed with the Chinese enterprises.
We call for the support of all Chinese steel enterprises and iron ore importers for this statement: please do not support or take part in any Rio Tinto marketing activity of spot ore in China as long as Rio Tinto fails to fulfill its long-term contracts in a serious manner.
Regarding the excessively low levels of fulfillment of the supply contracts made by Rio Tinto to the Chinese steel enterprises for 2006 and 2007, as well as the consequent losses incurred by the Chinese enterprises, we will pay close attention to developments and take the necessary measures to safeguard the legitimate rights and interests of the Chinese steel enterprises, for the purpose of the upkeep of the principle of "fair exchange" and in order to maintain the seriousness of contracts in international trading.