CISA Iron Ore Boycott Call Divides Chinese Steel Mills

Boycott "Doomed To Fail" - Australian minister

Industry experts in China have criticised the China Iron and Steel Association’s call for a boycott of iron ore produced by the big three global miners.

CISA has asked Chinese steel mills to concentrate on running down the stockpile of 75 million tonnes of iron ore sitting in the nation’s ports rather than buying from Rio Tinto, BHP Billiton and Vale. The call came in the wake of steelmakers in Japan and Korea agreeing quarterly pricing commencing 1 April and a price rise of over 90%.

However CISA’s call seems to have divided the industry.

"CISA sounds like a lobby representing Chinese steel mills. However, it does not run the business, and hence it has no idea of the real needs of the steel mills," one sales manager from a steelmaker in China’s Hebei province told the China Daily newspaper on condition of anonymity.

"If we don't purchase iron ore for two months, it will have a negative impact on our output. We will talk with miners privately to secure ore supplies," he said.

Analysts say that if steelmakers don’t buy from the global miners for two months, the surge in demand at the end of that period will lead to increased prices.

Li Xinchuang, president of the China Metallurgical Industry Planning & Research Institute, said that the country should enhance exploration of domestic iron ore mines and increase investments in overseas mining resources to have a bigger say in the pricing negotiations.

"The situation can be quite different if China controls 50 percent of the global iron ore imports," he said.

Meanwhile, Australian trade minister Simon Crean has said the boycott is "doomed to fail."

``What they have to understand is this is the market at work,'' he told reporters in Canberra on Tuesday.

``They can't influence the market by centrally-controlled edicts. That will be bound to fail.

``If their demand is as strong as it is, and they're having to compete with other countries who are competing for the same resources, then the price effect in the current circumstances is the natural consequence.''