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China Says Vale, BHP Threaten to Cut Iron Ore Supply

April 28 (Bloomberg) -- Vale SA, BHP Billiton Ltd. and Rio Tinto Group, the three largest exporters of iron ore, threatened to cut supplies unless steelmakers accept their price demands, the China Iron & Steel Association said.

The mining companies asked for price gains of between 90 percent and 100 percent for the steelmaking ingredient as global demand recovered this year, Luo Bingsheng, deputy chairman of the association, said today at a briefing in Beijing.

“They adopted a threatening policy,” Luo said. “If you don’t accept iron ore prices before a deadline, they threaten to cut supplies. Is this iron ore negotiations?”

The World Steel Association called on authorities globally to examine the iron ore market after Brazil’s Vale broke with a 40-year custom of selling on annual contracts and won a 90 percent price increase from Japanese mills. The Chinese government this month said it was investigating the possibility that BHP Billiton, Rio Tinto and Vale may be monopolizing supplies of the steelmaking ingredient.

Steelmakers in China have about two months of iron ore stockpiles as of the end of March, enough to ensure “stable production,” Luo said. Some mills have signed tentative agreements with the mining companies to ensure materials for their furnaces, he said, without giving details.

Amanda Buckley, a Melbourne-based spokeswoman at BHP Billiton, declined to comment. David Luff, a spokesman at Rio, wasn’t available for an immediate comment.

‘No Options’

Suppliers cut exports to China during price talks earlier, Angang Steel Co., the biggest Chinese steelmaker traded in Hong Kong, said April 21. Chinese steelmakers have “no options” and have to accept price demands, Jiangsu Shagang Group Co., the nation’s biggest privately held mill, said this month.

Global steel demand may expand 10.7 percent this year, rebounding from last year’s 6.7 percent slump, the World Steel Association said April 20. That’s leading to competing iron ore demands from Europe, Japan and South Korea for the material.

“The global iron ore market is in serious shortage,” Luo said. “Apart from China, steel production increased by 33 percent in the first quarter, while China’s output rose 24.5 percent.”

To contact the Bloomberg News Staff on this story: Xiao Yu in Beijing at yxiao@bloomberg.net

To contact the editor responsible for this story Andrew Hobbs in Sydney at ahobbs@bloomberg.net

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