China gives mixed messages on iron ore

Chinese Government and industry groups have given conflicting messages on China’s involvement in Australia’s iron ore industry.

State and industrial groups with China have given competing views on the country’s participation in Australia’s iron ore industry.

While China’s State Council has advised Chinese companies to secure more overseas resources, an industrial group has urged steel mills to boycott Australian iron ore in protest of an alleged price fixing monopoly, according to the West Australian.

The China State Council has released a report entitled How Should China Improve Its Overseas Resource Investments: Reflections on the Chinalco-Rio Tinto Deals, outlining its increased support for companies investing overseas following the collapse of Chinalco’s US$19.5 billion deal with Australian miner Rio Tinto, according to the SMH.

”The fundamental purpose of overseas resource investment is to create relatively secure supply systems for China’s resources supply,” the report said.

Adding that “with the recovery of the world economy, the opportunities are becoming less, so we should race against time.”

It called for the country to follow the ‘Japanese model’ which would see companies take a non controlling interest which is gradually increased over time, and which would not interfere in pricing arrangements.

Concerns have been raised globally regarding Chinese investment due to the organizational structure of Chinese companies, in which many are state-owned entities.

However, as the State has called for greater investment, a Chinese industrial group is urging steel mills to cease buying iron ore from Rio Tinto, BHP Billiton and Vale.

The China Iron and Steel Association (CISA) have urged companies not to import any iron ore for the next two months as way to “monopolistic behaviour” of the three major miners.

The group stated that at present, China has enough supplies to assure normal steel production for two months.

The Sino-Australian mining relationship has recently come under greater scrutiny following prickly iron ore pricing negotiations and the trial of former Rio employee Stern Hu.

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