Shanghai Baoshan Iron and Steel Corp. representing Chinese major steel makers, announced Wednesday in Shanghai that China has inked an agreement with Australian mining company BHP on the 71.5 percent iron ore price rise in 2005, according to a Baoshan Steel statement issued on Wednesday.

The statement notes that China's largest steel plant Baoshan Steel and Iron Corp. has, Through ample contact and friendly negotiations, reached agreement with BHP, the world's major iron ore provider, on the 71.5 percent iron ore price rise in 2005.

China's steelmakers have accepted a the world generally acknowledged 71.5 percent rise in iron ore prices in 2005, and BHP has given up its demand for an additional ocean ship fee for iron ore, and agreed to maintain the same price increase level with other iron providers, such as Rio Tinto and Brazil's CVRD.

China has accepted a record 71.5 percent rise in iron ore prices from BHP rivals in February this year after Japanese firms agreed to the price increase.

But BHP sought a higher freight premium on iron ore sold to China on top of the 71.5 percent price increase, insisting that the price rise reflects the cheaper shipping costs from its western Australian mines compared to more distant Brazil. Chinese steel companies have rejected the price push.

China's Iron and Steel Association statement issued last week noted that BHP's request, which asks for an additional 7.5 US dollars to 10 US dollars per ton ocean shipping fee for iron ore, has breached international convention, and under no circumstances will Chinese steel plants accept the unreasonable price rise request.

Insiders hold that Chinese steelmakers have played a key role in the negotiation with BHP over the iron ore price, safeguarded the present international price negotiation mechanism, and underscored the function of "Chinese demand" in the rational coordination.

According to sources with the China Iron and Steel Association, China will implement automatic registering system on imported iron ore, and only those with qualified standards can be admitted into the iron ore import business.

It is estimated that approximately 100 Chinese enterprises have reached the standards. Certain Chinese trade associations have made still greater efforts in coordinating internal trade on iron ore.

Insiders also hold that little room has been left for foreign companies to utilize "China demand" and get unreasonable profits.

Moreover they note that BHP is wise enough to give up its " unreasonable demand" at the last minute, which shows that "BHP is foresighted about its long-term profits brought by Chinese stable developing iron and steel industry."

The ministry of commerce said the agreement reached will bring the negotiation on iron ore back to the current international price setting mechanism and will be conducive to the iron ore international trade.

Iron ore constitutes a vital part of Sino-Australia trade. Australia is the largest exporter of iron ore to China. Chinese companies are encouraged to set up long-term, stable relations with the Australian iron ore providers under the win-win principle.

Source: Xinhua