Chinese warn Australian miners on iron ore pricing


AFP

SYDNEY — Chinese steelmakers Friday warned Australian mining companies against exploiting their position when iron ore price negotiations begin next month. Australian miners have won a 189 percent increase in the price of iron ore since 2002 as they have worked to meet a surge in demand from Asia. But the head of China’s peak steelmaking association, Zhang Xiaogang, told the Australian Financial Review that mining companies such as BHP Billiton and Rio Tinto should not abuse their advantage. Zhang, chairman of the China Iron and Steel Association, said the mining companies should remember their industry was only booming because of growth in the Chinese steel sector. “We need a cooperative partnership,” he told the newspaper. “When the market is good we all take profit together.

When the market is bad we share the risks together. Australian iron ore suppliers and Chinese steel mills are linked into a chain,” he said. “If one part is broken, all of us will fall into the sea.” The mining boom is a major reason for the strength of the Australian economy and is expected to push commodity exports to record levels in 2007 despite the worst drought here in a century. Zhang, who is also president of Anshan Oil and Steel, said he hoped both sides would “take a long-term strategic approach” when the negotiations begin after Chinese national holidays end on October 7. “The market cannot always be bullish,” he said. “China’s domestic iron ore production is soaring. So the growth in iron ore imports will not last forever.” Australian miners are the preferred source of iron ore for Asian steelmakers because of the much lower cost of shipping compared to bringing the material from Brazil or elsewhere. But Australian companies, which are investing heavily in infrastructure to boost production, are arguing they should be compensated for the huge price advantage they offer in terms of the shipping. Analysts are predicting an iron ore price increase of up 50 percent this year.