An official with China Chamber of Commerce of Metals Minerals and Chemicals Importers and Exporters called on international iron ore suppliers to consider the size of the Chinese market and reach a price deal as soon as possible.

 

The official, who declined to be named, said on Tuesday that no agreement has been reached yet on iron ore talks, although negotiations have been going on for seven months.

 

"This is rare in history," he said.

 

As the world's biggest buyer of iron ore, the official said, China has always hoped to achieve win-win in iron ore price talks, based on the principle of equality and mutual benefit and the international market supply and demand situation.

 

However, the recent move by some iron ore suppliers violated international rules and conventions, he said. "This will not be helpful in building long-term and stable cooperative relations between suppliers and buyers."

 

He noted that the Chinese central government has worked out a set of policies aiming to regroup the iron and steel industry and phase out out-dated production capacity in order to upgrade the industry's centralization.

 

This move will surely dampen China's demand on imported iron ore, he said.

 

China Iron and Steel Association also said Monday Chinese steel makers are not likely to accept the 19 percent increase in iron ore prices agreed to by Germany's ThyssenKrupp AG.

 

The price accepted by the German company would not be taken as the global benchmark as European mills are represented by Arcelor SA in negotiations for long-term prices, while Chinese steel makers are represented by Shanghai-based Baosteel Group, said Qi Xiangdong, deputy secretary-general of the association.

 

The Asian market and in particular the specific conditions of the Chinese market, must be taken into consideration in setting iron ore pricing, the association said Monday on its website.

 

"Otherwise, Chinese steel companies will not accept the prices," it insisted.

 

ThyssenKrupp reached an agreement on Monday with Brazil's Cia Vale do Rio Doce, the largest iron ore miner in the world, accepting a 19 percent rise in iron ore prices in 2006.

 

It is the first agreement this year between a major steel maker and an iron ore producer.

 

Baosteel, Arcelor SA and Nippon Steel Corp, which represents Japanese iron ore importers, are still in talks with the world's top iron ore miners Vale and Anglo-Australian groups Rio Tinto Ltd and BHP Billiton Ltd.

 

The talks have already taken a month longer than past agreements.

 

According to Sydney-based Global Mining Research statistics, every 1 percent increase in iron ore prices will add US$29.6 million to Rio's profit and US$21.4 million to BHP Billiton's profit.

 

China's demand for iron ore increased by 75.9 million tons and 121.8 million tons in 2004 and 2005 respectively.

 

In a bid to meet domestic demand, China is diversifying its sources of iron ore. China's output of iron ore is expected to increase by 77 million tons this year.

 

The country also plans to shut down small mills with an annual production capacity lower than 200 cubic meters. The move is expected to reduce China's demand for iron ore by 60 million tons.

 

(Xinhua News Agency May 25, 2006)