Iron ore mining hopeful Gindalbie Metals Ltd has joined calls for an rethink of the annual iron ore contract pricing system, which centres on negotiated prices between customers and resources companies.
The system, which has been in place since the 1960s, is under the spotlight as the 2009 negotiations between mining giants and Chinese steel mills drags on longer than ever before.
Iron ore customers in China are holding out for a larger price cut than that already accepted by other Asian steel mills.
The stand-off has been complicated by tensions surrounding the detention of Rio Tinto Ltd's Shanghai based iron ore executive Stern Hu and three other staff in China on suspicion of industrial espionage linked to the iron ore price talks.
Western Australia's premier Colin Barnett, who has been in China this week to push for greater Chinese investment in involvement in the state's resources sector, said he wanted the iron ore contract pricing system dismantled.
Gindalbie chairman George Jones told AAP on Friday from Hong Kong, after attending an Australia China Business Council function in Beijing, the system had obvious flaws.
"I can't comment on what the Premier is saying ... but clearly, with the events of the last couple of years, the negotiations over prices have shown some flaws in the system," Mr Jones said.
"Over the years ahead, I don't think there is one simple solution.
"I'm hopeful that a method can be found that will come up with an equitable pricing mechanism to avoid the angst and antagonism that has taken place in the past two years."
Australian iron ore miners in 2008 negotiated a record 85 per cent increase in contract iron ore prices with Chinese steel mills following unprecedented demand for the bulk commodity in 2007.
"We're going to be trading with China for hundreds of years and have got to find a simple way instead of having these annual battles," Mr Jones said.
BHP Billiton Ltd has for some time been calling for changes to the contract iron ore pricing system, preferring an index-based method, which analyst say could be re-set each quarter.
Meanwhile, Brazil appears to be benefiting from the tensions between Chinese steel mills and Australian iron ore miners, with iron ore exports from Brazil rising in July.
At the same time, shipments from Australia have fallen.
The world's largest iron ore miner, Brazil's Vale, has this week concluded 2009 iron ore contracts with European steelmakers, after agreeing a 28.2 per cent reduction in the prices.
Source: Sydney Morning Herald
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