Australia urges China to keep out of iron ore talks

SYDNEY (AFP) - Australia on Monday urged China stay out of difficult iron ore price negotiations with global mining giants after steel mills lobbied Beijing to intervene.
Trade Minister Simon Crean gave assurances Australia would also keep away from the fraught process in which steelmakers aim to strike annual contracts with Anglo-Australian firms BHP Billiton and Rio Tinto, and Brazils Vale.
We wont be getting involved. Ive made the point to China and I repeat the point, we recognise Chinas market economy status, Crean told reporters in Canberra.
All we ask in return is that it act in accordance with market principles, not seek to get government involved.
Creans comments follow a report that more than 10 top Chinese steel mills had asked Premier Wen Jiabao to make the iron ore benchmark price talks a matter of national importance.
Steel industry leaders warned the government they cannot agree to the 90 percent price hikes demanded by the miners and that such a rise could hurt national interests, the China Securities Journal reported Saturday.
The domestic steel companies can no longer bear such high quotes of iron ore and have been forced to hike steel prices to pass on the costs, an unnamed source told the publication.
Escalating the solution of the iron ore imports issue to the national level can avoid internal friction and protect the overall interest of Chinas steel industry, it added.
Crean said this years iron ore negotiations were always going to be robust given the strong demand for the key ingredient used in auto production, ship building and other industries, but government intervention would not help.
He said while the issue of intervention had previously been raised by the Chinese, in the recent visits I have been there, it doesnt get raised.
The truth is, market principles say when theres more demand than there is supply that will have an impact on price, Crean added.
Pressure is on Chinas steelmakers to strike a deal in this years annual price talks after they failed to reach an agreement with BHP, Rio and Vale for the first time in decades in 2009.
China, the worlds largest iron ore consumer, has now ended up paying more than its Asian neighbours because it must buy on the spot market.
Last years talks were also complicated by the arrest in July in Shanghai of four Rio Tinto executives, including Australian passport holder Stern Hu, who are due to face trial on industrial espionage and bribery charges.
Just weeks prior to the arrests, a 19.5 billion US dollar bid by Chinas state-owned metals giant Chinalco for Rio Tinto failed, raising speculation the events were linked.
Crean on Monday welcomed a report to Chinas State Council, seen by an Australian newspaper, which found that the Chinalco deal failed due to market forces rather than political problems.
I think thats an important concession if its true, Crean said.
We welcome that, and hope that not only was it a learning process but it provides the basis for moving forward with our relationship with China on a more solid footing.