‘China still has no say in iron ore pricing’

BEIJING: China continues to have no say in setting global iron ore prices despite being the world's biggest consumer of the key steelmaking ingredient, Wuhan Iron and Steel president Deng Qilin said on Saturday.

Deng told a news conference on the sidelines of the National People's Congress in Beijing major global iron ore suppliers -- Rio Tinto, BHP Billiton and Vale - were now capable of setting prices arbitrarily.

"Last year, the value of iron ore sold by Rio Tinto was the equivalent of the entire industrial value of the Chinese steel sector," he said.

"The cost of extracting 1 tonne of iron ore is $20, delivery costs are $56 and it is selling for $180-$190 -- this is a monopoly in the true sense of the word."

Deng also complained that the big miners were now trying to force spot pricing on their Chinese customers after abandoning a decades-old annual "benchmark" pricing system in favour of a more flexible quarterly system last year.

"They are also preparing to set up a base in Chinese ports to sell to you on a spot market basis. This assault on the Chinese steel industry is too big, the costs are too high and we can't bear them."

He was referring to a plan by Brazilian miner Vale to set up an export processing facility on the east coast of China, its biggest customer.

Deng added that the problems were compounded by domestic structural problems, with steel supply far outweighing demand.

Wuhan Iron and Steel, also known as Wugang, is China's third-largest steel mill by capacity, behind Hebei Iron and Steel and Shanghai's Baoshan Iron and Steel .

Deng, also the outgoing chairman of the China Iron and Steel Association, told Xinhua news agency earlier this week his firm aims to raise its total steel capacity to 60 million tonnes by the end of 2015.

He said the target would be met through the acquisition and expansion of several large mills as well as the relocation and renovation of some of its facilities.

China is pushing its top steel firms to lead consolidation in the sector, with an overall target to put 60 percent of total capacity in the hands of its leading 10 mills by 2015, from around 48 percent now.

China is also encouraging big enterprises to gain more control over foreign iron ore, and aims to bring the share of China-invested overseas supplies to 50 percent of the country's total imports by 2015.

Deng told Xinhua that Wugang was well on the way to meeting its own iron ore supply targets, and that the total export capacity of mines invested by the company amounted to "several hundred million tonnes".

Wuhan Steel recently signed an $800 million deal with Australia's Riversdale to buy a 40-percent stake at its Zambeze coal project in Mozambique.

It is also looking to form a joint venture to develop mining projects with Canada's Century Iron Mines Corp and Adriana Resources Inc