China Accuses Iron Ore Giants Of Cutting Supplies

Says they are reducing supplies in third quarter by at least 5 million tons

China's key steel industry association July 18 accused the world's three leading iron ore producers of cutting back on supply to ensure strong prices ahead of next year's negotiations. Brazil's Companhia Vale do Rio Doce, Australia's BHP Billiton and Rio Tinto are "working together" to strengthen their negotiating positions in talks with Chinese steelmakers, the China Iron and Steel Association said.

A statement said that "the 'big three' are working together to reduce supplies to China in the third quarter by at least five million tons."

"This will force us to rely on expensive spot rates and is an attempt by the miners to strengthen their position prior to the 2008 talks. It will alter the natural supply and demand," the statement added.

The three mining companies produce about 75% of the globe's iron ore, a key ingredient used to make steel.

China, home to the world's fourth largest economy and reliant on huge amounts of the key ingredient, has been anxious to have its voice heard in iron ore contract price negotiations since ore prices surged 71.5% in 2005. After protracted and acrimonious negotiations, China agreed to a further 19% rise in iron ore prices for 2006 and then a further 9.5% increase in 2007.

China is the world's biggest consumer of iron ore, importing 326.3 million tons last year, an increase of 18.6% from 2005. This year China is expected to import 367 million tons of iron ore, the Shanghai Securities News reported earlier this week citing Luo Binsheng, the secretary general of the industry group.

Copyright Agence France-Presse, 2007

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