SteelOrbis Shanghai
Chinese state-owned media reported on November 9 that the ongoing iron ore negotiations in Shanghai between Chinese steelmaker Baosteel and Australian miner BHP Billiton have reached deadlock.
A participant at the negotiation meetings disclosed that no agreement could be reached because the Australian miner insisted on CIF payments for next year's iron ore. On the other hand, the Chinese side continued to insist on payment according to the current international practice in the iron ore seaborne trade.
This year sea freight rates have experienced a general price increase. Given the sharp difference between the freight rates for the Brazil-China and the Australia-China routes, the Australian mining companies are proposing that the iron ore deal for 2008 be concluded in CIF terms, in order to claim extra revenues based on the mentioned freight rate difference.
However, the proposal has met with strong opposition from the Chinese side, which has adopted a clear stand of, "No CIF negotiation and no spot price negotiation."
China Iron and Steel Association (CISA) secretary general Luo Bingsheng had previously declared that the international price for iron ore shipments should be determined on FOB basis, as in previous years, since the FOB price is a price determined for long-term trade.