One of the main reasons that made China a victim in annual iron ore price talks of the past years lied with the fact that there was no uniformed price in the Chinese market, said Deng Qilin, general manger of Wisco and president of the CISA. One of the greatest successes in this year’s negotiation was the shift of this disadvantage to a single price mechanism: foreign iron ore suppliers are required to invoice their products sold to China for one fixed price in the future.

        Deng said China has been trapped in annual talks of the past 15 years, due partly to the growing demand from its robust economic growth; and partly to the sheer monopoly by the three largest iron ore suppliers, three absolutely vital players in each year’s iron ore price negotiations with consumers in all major steel-producing regions such as China, Japan and Europe. The prices of iron ore began perking up during the three years between 2005 and 2007, and reached $200 per ton in June and July of last year. The costs on average, however, were less than $30 per ton. It was China’s growing demand that has made it possible for the suppliers to reap such a windfall. 

         Japan, South Korea and Europe have successfully resisted to the unreasonable rallies of the past years because, according to Deng, they are in a position to make a united voice on behalf of their own interest. Nippon Steel, as one of Japan’s three biggest steelmakers, may punish untamed peers using its clout. Posco is the biggest steelmaker in South Korea. ArcelorMittal, after its successful entry into Europe, becomes an absolute leader in the Continent. In China, however, there are more than 1,000 steel producers including province- and city-level producers and non-government run mills, with only three directly operated by the central government. Large quantities of iron ore are imported into China and resold by state-owned Minmetals, Sinosteel, and other private importers, regardless of the regulations instructing that they can just charge 3 percent of commission fees.

        In August of this year, the CISA announced that Baosteel, on behalf of the Chinese side, settled the annual iron ore prices in 2009 with Australia’s third largest supplier FMG, plus pledging to purchase 20 million tons of iron ore in the latter half and to fund FMG $5.5 billion to $6 billion. The new prices, however, have yet been recognized by the top three iron ore producers – BHPB, Rio Tinto and Vale, from which Chinese buyers had been importing iron ore at a price 33 percent lower than last year, akin to Japan’s signed early this year.

Deng Qilin reckoned that no result would be more clearly a beneficiary of China, a country needs to import 400 million tons of iron ore each year, than was this time, because the prices were lower than those agreed with Japan, a country usually imports millions of tons of iron ore.

       The settlement this time also sent a bold message to overseas suppliers that Chinese buyers, big or small, private or government-owned, would only accept one, uniformed price.

It is reported that the CISA has disqualified around 10 enterprises from importing iron ore ahead of the new round of iron ore price talks for 2010 slated in October. More efforts will be done to improve the register rating system, for a better understanding of quantities and direction of imported iron ore, and the import agency system aimed at cementing the untied price policy.