China’s interest should be reflected in the ongoing iron ore negotiations and China advocates sticking to the mechanism for long-term iron ore price agreements, Yao Jian, spokesman for the Ministry of Commerce, said Tuesday.

Yao said his ministry and the industry ministry support Chinese steel
firms in the iron ore talks.

Yao, who was speaking at a regular news
conference, also said big price swings should be avoided in iron ore
prices.

China’s interest in securing iron ore at reasonable prices
should be reflected in ongoing negotiations and the government wants to
stick to the mechanism of long-term price agreements, Yao Jian,
spokesman for the Ministry of Commerce, said Tuesday.

Yao said his
ministry and the Ministry of Industry and Information Technology
supported Chinese steel mills on their stand in negotiations to set
prices for the 2010 contract year starting April 1.

It is too early
to speculate what policy tools Beijing will employ to support Chinese
steel mills, Yao later said on the sidelines of the press event.

Japanese
and South Korean steel mills have yet to indicate the price they are
willing to pay in 2010, Yao noted.

Yao, who was speaking at a
regular news conference, said big price swings should be avoided in the
case of iron ore, the key raw material used in steel making.

The
comments come amid reports that global iron ore miners have put annual
iron ore benchmark pricing talks with China on hold because of a
widening gap in expectations on both sides about 2010 prices.

The
move spells greater stress for the annual benchmark pricing system,
which pits global miners against their Asian customers to set a single
price for bulk iron ore shipments. Miners, led by BHP Billiton Ltd., are
increasingly pushing for a quarterly pricing system, in place of the
yearly agreement now. BHP has already seen some success in converting
its coal supply agreements with Japanese buyers into a quarterly
contracts.

During the term discussions, Brazil’s Vale S.A. had
pushed for a 90% increase in the 2010 benchmark price for iron ore in a
verbal notice to Chinese negotiators, though the proposal wasn’t put in
writing, a senior-level steel industry executive, who didn’t wish to be
named told Dow Jones Newswires last week.

According to a state media
report Saturday, more than 10 top domestic steel mills petitioned
Premier Wen Jiabao during the National People’s Congress last week,
asking the government to escalate the difficult iron ore price talks to
“a matter of national importance.”

The petition said miners’ demands
to raise iron ore prices by as much as 90% was too much to stomach, and
steelmakers would have to pass higher costs downstream, hurting China’s
national interests, the China Securities Journal report said.

Source:
Dow Jones

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