China has delayed issuing permits needed to import some spot iron ore cargoes from Australia, thereby upping the stakes in ongoing price negotiations with miners.
The delays appear to be a response to Rio Tinto's earlier declaration that it would cut the volume of iron ore delivered to term customers by 10% - as allowed under its contracts - in order to maximize sales on the spot market, where prices can be twice as high. The sources did not say how many cargoes were affected. The miners, Rio Tinto and BHP Billiton, are still negotiating with steel mills over term iron ore prices for the upcoming year, holding out for more than the 65% increase that mills agreed with Brazil. To prevent merchants and steel mills from importing too many spot cargoes and thereby driving up spot prices during negotiations, Chinese authorities vet contracts before clearing cargoes for import and delivery to final users. Senior officials at top Chinese iron ore importer Baosteel Group declined to comment on whether spot imports from Australia were currently being delayed. Last week, Baosteel chairman Xu Lejiang told that Australian miners were already cutting the volumes delivered under term contracts.
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