Speaking to the media on June 19, China Iron and Steel Association (CISA) secretary general Shan Shanghua outlined the following three principles to which China will stick in the international iron ore price talks:
1. China will not accept a 33 percent reduction in iron ore contract prices;
2. China opposes the spot ore tender activities currently performed by Rio Tinto and BHP Billiton;
3. Chinese mills are not allowed to participate in the spot ore bidding, and those mills involved will be investigated and punished.
Due to the stalemate in the iron ore price talks, Rio Tinto and BHP Billiton have directed their attention to the spot ore market, selling spot ore for July by tender. The active involvement of large mills and traders has resulted in a relatively high bottom line for Rio Tinto, with deal prices even approaching the settled contract ore prices inked between Japan and Australia.
Mr. Shan said he strongly opposed the spot ore tender activities of Rio Tinto and BHP Billiton. He remarked that the CISA has no right to stop their tender activities, but Rio Tinto and BHP Billiton will have to choose between contract ore sales and spot ore sales. If they proceed with spot ore sales, then the CISA will no longer continue the iron ore contract talks with them.
Furthermore, the CISA will prevent Chinese mills from attending the spot ore bidding. Mr. Shan noted that it is not the CISA's position to oppose imported ore bidding; however, according to document No. 5 of the State Council (i.e. the plan for restructuring and invigorating the Chinese steel industry), China only accepts one price for imported ore. Whether large-scale mills, small-scale mills or traders, all Chinese enterprises will have to abide by this regulation, Mr. Shan said.