Doesn't sound friendly!A MOVE by BHP Billiton to corner the...

Doesn't sound friendly!
A MOVE by BHP Billiton to corner the global bulk carrier ship market has forced its newest rival, Fortescue Metals, to pay an Australian record to get its iron ore to market.

Fortescue, which last week broke the longstanding iron ore duopoly between Rio Tinto and BHP in the West Australian Pilbara region with its maiden cargo, has booked a so-called Capesize carrier for its second shipment, which is due to depart on June 3.

The Australian revealed this week that BHP had booked 17 Capesize carriers - an enormous type of ship too big to fit through the Panama Canal - to move ore between Australia and China to capitalise on high iron ore prices paid on the spot market.

The BHP-induced spike in demand for carriers has forced Fortescue to pay an estimated $US44.50 ($46.29) a tonne to ship its second cargo to the Chinese port of Qingdao - about $US10 a tonne above last week's market rate and a record for an Australian iron ore shipment of its type.

It is believed that the higher shipping expense will cost Fortescue an extra $US1.7 million for the shipment. Fortescue paid about $US160,000 a day for its maiden shipment, celebrated with a ceremony in the Pilbara last week. The cost for the same shipment based on the increased prices would have been about $US210,000 a day.

Fortescue, which sells all its ore into long-term contracts with Chinese steel mills, is desperate to ship two million tonnes over a four-week period to appease its bankers and allow the company to expand its Pilbara operations.

BHP, which normally books one carrier a day, denies it sells ore into the lucrative spot market. But market experts say the company might be trying to gain leverage in its annual negotiations with China on long-term contract prices.

BHP and Rio are demanding Chinese steel mills pay them more to match the premium paid to global iron ore giant Vale for shipping its ore from Brazil.

Fortescue founder Andrew Forrest last night declined to comment on the shipping rates. But last week he called for a truce and to form a united front with BHP in the Pilbara to protect Australia's leading position in the iron ore market.

China imported a record 42.85million tonnes of iron ore in April to feed its growing economy, and is believed to have built a stockpile of about 62million tonnes.

It is believed the China Iron and Steel Association has directed steel mills to start depleting the stockpile to try to reduce the bargaining power of BHP and Rio.

Fortescue has arranged with its Chinese customers to pay half the shipping costs for its ore.