Australian Trade Minister Rejects Calls For Iron Ore Boycott

"Market Should Determine Price" - Crean

Australia’s Federal Trade Minister Simon Crean has criticised calls from China for a two-month boycott of iron ore purchases from the ‘Big Three’ global miners.

A report over the weekend said that the China Iron and Steel Association (CISA) has urged the boycott in protest at what it claims is a price monopoly by Rio Tinto and BHP Billiton, and Vale.

CISA urged steelmakers and traders to use up what it claimed to be a two-month stockpile of iron ore in the nation’s ports before buying again from the large global miners.

Last week steelmakers in other Asian countries such as Japan and South Korea agreed to accept price increases of almost 100 per cent for iron ore supplies over the next three months; however Mr Crean said that calls for a boycott went against the spirit of the market.

"You've got to let the market determine the price. You can't be issuing directives in terms of restricting supply," he said.

Mr Crean suggested that China should seek market-based remedies such as helping to improve efficiency and iron ore supply from Australia.
"That's the way you get the balance back between demand and supply. To simply try and do it through central edict defeats the whole purpose of functioning as a market," he said.

Mr Crean suggested that CISA’s call would fall on deaf ears and that a boycott was unlikely to succeed because demand for iron ore in China was so high.

Chinese steelmakers are still in talks with the three large mining groups over a benchmark price, however there are fears that the benchmark pricing system may be coming to an end. Traditionally, prices have been set annually for the period from 1 April to 31 March each year; however with spot prices around double previous contract prices miners have been trying to impose quarterly pricing contracts on their customers. Although steelmakers in Japan and South Korea have agreed to quarterly pricing Chinese steelmakers – and their government – are known to want the annual pricing mechanism to continue.




China is the world’s largest consumer of iron ore.