China stops talks with Rio, turns to Vale: report

(chinadaily.com.cn)
Updated: 2009-07-20 13:26

China has reached out to the Brazilian iron ore supplier Vale SA after failing to reach an agreement on iron ore prices with Australian mining giant Rio Tinto by the traditional deadline of June 30, the Australian Financial Review reported on Friday.

The Australian newspaper did not reveal where it got the information.

China Iron & Steel Association (CISA), the industrial regulator which is leading the talks, insisted on a 40 percent price cut from last year’s prices, while Rio stuck to its offer of a 33-percent price cut for 2009-2010.

Zeng Jiesheng, an industrial analyst, said that it would be very difficult to persuade Vale to lower its prices. As a result, China's contact with Vale was likely a way of exerting pressure on Rio, he said.

Beijing Business Today reported – without giving a source – that excluding the cost of shipping, Vale's ore costs US$7 more per ton than Rio Tinto’s. The Chinese-language newspaper also said that it costs Vale, whose mines are largely in Brazil, an additional US$20 more per ton than Rio to transport its ore to China.

The price negotiations have been complicated by the fact that four employees of Rio’s Shanghai office, including general manager Stern Hu, were detained on charges of espionage on July 5 in Shanghai.

On Friday, in a statement on its official website, Rio denied the allegations saying they are "wholly without foundation".

A Chinese analyst who would not give his name told local media later that Rio's attitude towards the spy case makes chance of successful talks "quite slim".

"Even CISA finally reaches an agreement with Rio, that will probably only happen after the spy case is resolved," he said.