Most things seem to have gone China’s way in the past year. One exception is the failure to win a war of attrition with the world’s iron ore miners. In fact, in their dealings with BHP Billiton, Rio Tinto and Vale the Chinese negotiators have been utterly outflanked. The latest humiliation, according to the Financial Times, is that the big three have chosen to ditch negotiations with the Chinese side altogether, and set a benchmark price with Japan instead. This will then be presented to Beijing on a “take it or leave it” basis. China spent much of last year demanding a 40-50% cut in the price of ore, figuring it could use its buying clout to get its way (it accounts for 50% of all seaborne iron ore). But surging spot prices undermined its negotiating position. The miners’ latest tactic will infuriate, but in this particular battle China’s generals may have run out of options.
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