article
The seats at the iron-ore negotiating table are shifting in Shanghai.
The China Iron and Steel Association (CISA) is displeased with giant Brazilian iron ore producer CVRD and has pushed its chair to the back for now.
In its place are Astralia giants BHP Billiton and Rio Tinto.
At stake is the price of what will be Australia's largest commodity export next year. The Australian Bureau of Agricultural and Resource Economics forecasts iron ore exports will earn $18 billion on the basis of a price rise of 12 per cent for 2006-07.
Such a rise would follow the 71.5 per cent price rise to $US40 a tonne in the 2006-06 year.
The Chinese say such a big rise is unfair. The iron-ore exporters say it is easily explained as a catch-up to soaring steel prices, profits and racing iron-ore demand.
This has heightened emotions during the negotiations.
CISA gave CVRD a pasting last week after the Brazilion iron-ore exporter suggested a 24 per cent price rise, saying it was "not rational and cannot be accepted".
Part of the problem for the iron-ore exporters is knowing who they are negotiating with .
The exporters wonder whether Baosteel, China's largest steel producer and lead negotiator for the Chinese steel mills, has the power to negotiate for the other mills or whether is it just a mouthpiece for its majority owner, the Chinese government. Or is it CISA that really controls the show?
These negotiations mark a watershed. It's the first time China, now the largest iron-ore consumer and steel producer in the world, has taken control of the annual debate. The Japanese steel mills historically the lead negotiating group for iron ore prices in Asia, aren't negotiating this year. At least not yet.
The new role of China partly explains why negotiations this year are confusing.
The Chinese are known for their tough negotiating skills, but China is also grappling with the respective roles of the market versus governement.
If China can't settle, the Japanese could come back into the negotiations - a massive loss of face for the Chinese.
Beijing has said that a price increase of up to 10 per cent would be acceptable and, as exporters have suggested 24 per cent, at least the negotiating positions have been set. A settlement is close, perhaps two to four weeks away. The market's money is on a 15 per cent price increase.
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