China: Iron Ore Suppliers Disrupting Market

Chinese steel industry association accused foreign iron ore suppliers of disrupting supplies and price talks by encouraging importers to buy more on global spot market.

BEIJING (AP) -- China's steel industry association accused foreign iron ore suppliers on Friday of disrupting supplies and price talks by encouraging importers to buy more on the global spot market.

The association's latest blast at miners came as the two sides are locked in talks on long-term supply contracts, with China pushing for big price cuts. Tensions were heightened by China's detention July 5 of four employees of Rio Tinto Ltd., lead negotiator for global miners, on espionage charges.

"Foreign iron ore suppliers promoted sales of a huge amount of spot iron ore on the Chinese market," the China Iron & Steel Association said in a statement. "It caused excessive imports and it has distorted the supply and demand balance in China and greatly disturbed the iron ore price talks."

The association took over contract talks with foreign suppliers this year as part of government efforts to tighten control over the industry and use China's status as the world's biggest iron ore buyer to get a better deal on raw materials.

The group has accused smaller Chinese mills and trading firms of hurting its bargaining position by buying ore on the spot market instead of holding out for price cuts, Chinese news reports say.

The price talks are still under way, news reports said Friday, citing CISA secretary-general Shan Shanghua. The other major suppliers are BHP Billiton Ltd. and Brazil's Vale SA.

The talks appear to be snagged on China's insistence on bigger reductions than the 33 percent cut agreed to earlier with Japanese and Korean steel mills. News reports and industry analysts say China wants a 40 percent price cut.

Iron ore bought on the spot market accounted for 82.7 percent of China's imports so far this year, CISA said. It gave no comparative figure for last year.

Total iron ore imports rose 29.3 percent in the first half of the year to 297.2 million tons, the association said.

The detained Rio employees, who include an Australian, are accused of bribing employees of Chinese steel companies to obtain confidential information on China's negotiating strategy, according to state media.

At least 35 Chinese steelmakers had signed contracts to buy from Brazil's Vale as of the end of June, according to the newspaper China Business News.

Profits of China's top 71 big and medium sized steel producers plunged 98.3 percent to 1.7 billion yuan ($249 million) in the first half of 2009, CISA said earlier.

Associated Press researcher Bonnie Cao in Beijing contributed to this report.

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