After having declined for a while, Chinese government admitted that tentative measures, also including a secret price cap, were taken on the
iron ore imports as SteelOrbis reported on March 14, 2006. The government said that the measures were taken in order to prevent the accumulation of
iron ore inventory at ports and they were now lifted as they reached their goals. Yet, the government also implied that they were monitoring the
iron ore imports closely and they would re-impose the measures in the case of necessity. The Australian government reacted firmly, saying that the measures were indicating the Chinese government's interference to
iron ore price talks and they were not acceptable on a liberal commercial market. Australian Federal Resources Minister Ian Macfarlane stated that
Australia has the opportunity to continue to supply
China with
iron ore cheaper than it can buy from most other places. Therefore continuing to a commercially negotiated arrangement with Australian exports, and allowing companies like
BHP and
Rio Tinto to make the
investments to supply the growing demand for
iron ore in
China would be in
China's best interests. Meanwhile, Shanghai Securities News cited from a researcher of the Ministry of Commerce, saying that the Chinese government would not be in breach of World Trade Organization rules if it intervenes in negotiations between foreign
iron ore suppliers and Chinese buyers. According to the paper, the researcher claims that a government role is necessary for such a big deal as the foreign parties are monopolies while the Chinese parties are diversified and they do not have a lot of bargaining power. Currently, Chinese steelmakers are holding negotiations with the three major global
iron ore suppliers –BHP Billiton,
Rio Tinto and CVRD- under the leadership of Chinese steel giant
Baosteel. While the governments made statements, neither Chinese
iron ore importers, nor Australian exporters did not comment on the issue. On the other hand,
Australia's Fortescue Metals announced on March 13, 2006 that it had signed 10-year supply contracts with six Chinese mills for a total of 6.4 million metric tons
iron ore per year.
China is
Australia's largest
iron ore customer and a 10-15 percent increase is expected as the outcome of
iron ore price talks.