Satu kisah lagi dari Cina yg meski tdk punya resource iron ore tapi bernyali menantang suppliernya & membuat geger giant mining company .
====================================== Our miners won't wear China's cap Rowan Callick and Andrew Trounson March 09, 2006 BEIJING'S move to cap iron ore prices represents a gamble to shake up the global iron ore trade and put it at the centre of price negotiations, but the jury is out on how far China is prepared to go. China is seeking to hold down prices by barring the import of consignments costing above last year's negotiated level, at a stroke undoing the arguments from the big miners, Rio Tinto, BHP Billiton and Brazil's CVRD, that spot prices of more than 20 per cent above contract prices underline the case for another hike in benchmark prices. But the question is, how long are the Chinese prepared to keep the price in place? Yesterday many in Australia's mining industry were taking a jaded view of China's move, seeing it has traditional posturing at a time when price talks had stalled between the traditional price setters, the Japanese steel mills and the miners. "At this stage there is a lot of noise, and it tends to occur at this point in the negotiations. But I don't think it is anything more than noise at this stage," iron ore industry veteran and Aztec Resources managing director Peter Bilbe said. But others aren't so sure such as industry consultant and close China watcher Carlo Caiani. "We are absolutely sure that (the price caps) are real. This is a well orchestrated strategy by the Chinese Government at the highest levels," Caiani said. "There is a much bigger geopolitical game being played out here than just market forces," he said. While analysts are generally forecasting the miners to win a further price increase of 5-20 per cent on the back of continued strong demand and tight supplies, Caiani is tipping a rollover in high quality ore and price declines for lower grades of as much as 10 per cent. And Caiani believes the Chinese are prepared to forgo some imports if they can't get their way on prices and instead ramp up their imports of steel products from Russia. It certainly appears as though the Chinese are set on politicising the talks and dragging the Australian government into discussing ore prices, which Beijing attempted to do last year when BHP-Billiton controversially sought a higher price for China than the 71.5 per cent increase negotiated with the Japanese mills. Resource analysts see the move as underscoring China's growing importance in the iron ore business with the country forecast to account for 45 per cent of total global imports in 2006. "The Chinese are saying, not only to the producers but to the Japanese, 'this is our game. We're taking over price setting.' They're flexing their muscles," Ray Chantry, analyst with EL & C Baillieu in Melbourne, said yesterday. For the moment the big miners are refusing to be intimidated. "The price will be determined by the market," CVRD president Roger Agnelli said yesterday. Agnelli said the new price should reflect world demand and rising production costs. "To continue investing, we must have adequate prices." China's move comes at a fluid time in the industry. Annual price negotiations in Japan, with Nippon Steel and CVRD the leading players on behalf of buyers and producers respectively, have bogged down. Production has slowed to a crawl in Western Australia's Pilbara due to cyclones costing a likely 5 million tonnes - 60 per cent of it headed for China. And BHP-Billiton has appointed tough guy Chris Lynch as its new iron ore chief. With supply still tight, the miners - with the big three, CVRD, BHP, and Rio Tinto's Hamersley Iron controlling about 70 per cent of the globally traded market - had expected to win a price rise of about 20 per cent, on top of last year's jump that was driven by China's surging demand. The risk for China is that it could find itself short of the ore it needs to keep fuelling its economic growth, which the government projects at 8 per cent in 2006. After negotiating in 2003 an unusually low price for its first liquefied natural gas contract, with the Australian LNG consortium, it insisted on maintaining this rate - but has failed to secure any more gas, with neighbours Japan and South Korea signing up deals as the market price has risen. One of the big wins China is seeking is to break up the suppliers' price consensus that started to look shaky last year when BHP controversially attempted to persuade China to pay more for Australian ore - considerably cheaper than its competitors, mainly because of lower freight costs. Rio refused to join its great rival in this bid, and it failed after two tense months. Last year, the landed cost of Australian ore was $US55 per tonne, $US12 or 18 per cent below the average landed cost of all ore. Observers in China say that the country does not appear to have been building up stockpiles ready for this latest shock move. It has not been buying as much Indian ore, chiefly at spot market prices, as in recent years - in part because of controls introduced a year ago which have seen about 200 of the smaller Chinese mills forced to merge or cease operating. But now it has moved to control a much bigger market, that of the long term contracted supply. Mr Chantry said: "The producers have major expansion plans in Australia and elsewhere, based primarily on maintaining their market shares in China. Will one of them break ranks to do a deal that guarantees higher future volumes? "This is a watershed in the negotiations. The game has moved on to a new level. The Chinese need the higher grade imported ore, they can't just keep turning the ships away," he said. A year ago, the Commerce Ministry introduced a new licensing system that gave all ore importers over a certain size, automatic approval - but now this system has been remodelled to ban imports of contracted ore at a higher price than the base negotiated a year ago. This means that because some freight rates have risen, consignments are being denied official approval, and shipments - though not yet from Australia - have been rejected. Russia's Interfax news agency reported yesterday that it had obtained a document issued by the Economic and Trade Commission of Jiangsu province passing on the Commerce Ministry's price caps to operators using its ports. The move marks an acceleration of the drive to consolidate the steel sector - which grew rampantly several years ago when ore prices were low and steel prices high, with new private operators building mills. But steel is viewed by Beijing as a core "strategic" industry, which must remain in state hands. Hence, in part, the drive by the Commerce Ministry - whose high profile Minister, Bo Xilai, will accompany Premier Wen Jiabao to Canberra - to seize the running on this issue. Success in stemming the cost of inputs and responding to the constant anxiety of Chinese leaders at the destabilising effect of inflation, would be rewarded highly by Beijing, even though last year's ore price rise only comprised 4 per cent of the overall cost increases of the industry. The president of the China Iron and Steel Confederation is one of China's most powerful women, Xie Qihua, also chairwoman of Baosteel, the country's Shanghai-based leading producer. Baosteel has been appointed the international price negotiator on behalf of the rest of the industry, and has just increased its own prices by 10 per cent. Taking tough action now also gives key officials the capacity to claim later that they were only forced to cede higher prices because of weak Japanese mills and rapacious Australian and Brazilian suppliers. This involves, however, a bold calculation on the part of Beijing that the ore producers are so eager to supply to them, as China has become the world's biggest market, that they will tolerate continuing market uncertainty. Analysts were yesterday saying that a different outcome might be to drive Australian ore purchases from long-term contracts towards the spot market, which is likely to remain higher for some time - with Japan, whose economy is now growing again at a faster pace than the US and Europe, hungry for bigger contracts. --------------------------------------------------------------------- To unsubscribe, send email to: iagi-net-unsubscribe[at]iagi.or.id To subscribe, send email to: iagi-net-subscribe[at]iagi.or.id Visit IAGI Website: http://iagi.or.id IAGI-net Archive 1: http://www.mail-archive.com/iagi-net%40iagi.or.id/ IAGI-net Archive 2: http://groups.yahoo.com/group/iagi Komisi Sedimentologi (FOSI) : Ratna Asharina (Ratna.Asharina[at]santos.com)-http://fosi.iagi.or.id Komisi SDM/Pendidikan : Edy Sunardi(sunardi[at]melsa.net.id) Komisi Karst : Hanang Samodra(hanang[at]grdc.dpe.go.id) Komisi Sertifikasi : M. 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