Trade furore over China-ore war Email Print Normal font Large font By Mary-Anne Toy, Beijing, and John Phaceas March 8, 2006
Advertisement AdvertisementThe future of Australia's trade relations with China have been plunged into uncertainty after the Chinese Government moved to control the price it pays for Australian iron ore to feed its booming economy.
Fresh from China's acquisition of the huge Aurukun bauxite reserve in Queensland, and the expected signing next month of an agreement clearing the way for the first Australian uranium sales to China, the intervention in the iron ore market is set to cause alarm in Canberra as well as the boardrooms of Australia's biggest mineral exporters, BHP Billiton and Rio Tinto.
Last night, Canberra and Australia's iron ore exporters were still scrambling to determine the full effect of China's move, which The Age has been able to confirm with Asian trade sources.
The Commerce Ministry directive outlining the price cap - believed to be $US54 a tonne for Pilbara iron ore, roughly the current price - was distributed to its provincial commerce ministries in the past few days.
Industry sources confirmed that steel mills and iron ore importers were called in over the past few days by provincial commerce officials, given the directive to read and told in no uncertain terms that if they paid more than the capped price for iron ore, they would not be given an import licence.
The industry representatives were allowed to take notes but were not allowed to take away a copy of the directive.
One industry source said Hong Kong-based importers were already being forced to find ways around the cap in order to fill orders from mainland steel customers.
Apart from breaching World Trade Organisation obligations, the Chinese action also breaches assurances given to Australia last year when the Chinese Government set up its new import licensing regime for iron ore. At the time, the Chinese insisted that the import licence scheme was merely to allow it to gather better statistics on the iron ore industry.
Miners are pushing for a further iron ore price increase of 20 per cent this year, largely on the back of runaway demand from China and supply shortages. But steel makers argue any increase could seriously damage their industry, which is already struggling to cope with last year's 71.5 per cent price rise.
China has led the call, and has repeatedly warned it will not accept any increase that it considers a threat to its economic wellbeing. China's top representative in Australia, Madam Fu Ying, warned three months ago that the latest iron ore price increase had "caused lots of concern" in China.
The news comes less than a week after the breakdown of a third round of official price negotiations between Pilbara miners BHP Billiton and Rio Tinto, and Japanese steel makers in Tokyo.
A spokesman for Industry, Tourism and Resources Minister Ian MacFarlane said: "If it is true we'd be hopeful we have established a government-to-government relationship that's of a close enough nature to negotiate in the interests of both nations."
