Some major players in China's steel sector, which produced nearly half the world's steel in 2009, have asked Premier Wen Jiabao to direct the government to tackle iron ore price negotiations, the official China Securities Journal has reported.
'We recognise China's market economy status, all we ask in return is that it acts in accordance with market principles,' Australian Trade Minister Simon Crean told reporters.
Crean said Chinese steelmakers locked in talks with Australia's two biggest iron ore miners, Rio Tinto and BHP Billiton over pricing of hundreds of millions of tonnes of ore for delivery over the next 12 months 'should not seek to get government involved'.
The vice president of the China Iron & Steel Association (CISA) and the heads of more than 10 mills wrote the joint letter to Wen on March 11, asking him to take up the issue of rising iron ore import prices at a national level, the paper reported, quoting what it described as authoritative sources.
'The iron ore negotiations are always going to be robust negotiations,' Crean said, adding China was helping ease supply shortfalls by investing in local iron ore mines.
'There are a number of ways this issue can be addressed, but it won't be addressed by governments intervening in the marketplace. We reject that,' he said.
Crean said the matter had been discussed in the past with the Chinese government, although the subject had not been raised at more recent meetings between the two countries.
'As for the steelmakers, in terms of them being dissatisfied with the way negotiations have been run in the past, the solution doesn't lie in getting the government to intervene,' Crean said.
'The solution lies in understanding and being transparent and open about what their needs are going forward and being creative in the ways those needs can be met,' he said.
The companies seeking the premier's intervention included Baosteel, Wuhan Iron & Steel, Anshan Iron & Steel and Hebei Iron & Steel, according to the China Securities Journal.
China's steel sector faces a huge increase in iron ore costs this year. China's own iron ore output cannot meet domestic producers' needs, so they depend on imports.
Chinese steel mills aren't alone in voicing concern that iron ore prices will skyrocket in 2010 as global industrial activity rebounds.
European steel industry group Eurofer last week said hefty price hikes of 80 to 90 percent forecast by analysts could hurt European economic recovery.
(Reporting by James Regan; Additional reporting by Michael Perry; Editing by Clarence Fernandez)
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