Published: Monday August 17, 2009 MYT 12:03:00 PM
Updated: Monday August 17, 2009 MYT 12:05:01 PM

China announces iron ore deal with Australia

BEIJING: China announced an iron ore supply contract Monday with a smaller Australian miner in an apparent effort to prod global producers to accept lower prices in deadlocked contract talks.

Australia's Fortescue Metals Group will sell China iron ore for 94 U.S. cents per dry metric ton, the state-sanctioned China Iron & Steel Association announced.

That is below the price of 97 U.S. cents agreed to with Japanese and Korean mills for this year's supplies and that major suppliers wanted Chinese mills to accept.

The Chinese industry group is deadlocked in price talks with the three major global iron ore suppliers - Anglo-Australian miners Rio Tinto Ltd. and BHP Billiton Ltd. and Brazil's Vale SA.

Beijing is pressing for deep reductions following two years of price hikes totalling more than 100 percent.

A Cabinet minister said last week that China wants more control over global prices due to its status as the world's largest iron ore consumer.

"The deal breaks the market impasse that had enveloped the Chinese iron ore industry and created uncertainty and risk," Fortescue said in a statement issued in Australia.

Fortescue said the deal includes a pledge by CISA to give the company priority in negotiating next year's prices if annual talks are held.

That could erode the influence of Rio, BHP and Vale in setting prices.

Employees who answered the phone at CISA's Beijing headquarters refused to give more details or transfer a reporter's call to the group's spokesman. - AP

On the Net:

Fortescue Metals Group:
www.fmgl.com.au/IRM/content/home.htm

China Iron & Steel Association:
www.chinaisa.org.cn/index.php?styleid=1

Latest business news from AP-Wire