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.
© ChinTell Ltd. All rights reserved.
Sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.