China should stop hogging profits from domestic sale of Australian iron ore

Chinese iron ore importers should be more willing to share profits with Australian miners, and stop taking advantage of both the price difference between Australian and Brazilian iron ore and their powerful position in China when selling in the domestic market, an industry official said in a recent exclusive interview with Interfax .

"The issue of the price differential for sea transport between Australia and China, and South America and China, is creating ill will as the Australians see the Chinese importers taking all the profits," Dr. Desmond William, president of the Western Australian Branch of the Australia China Business Council (ACBC), said.

ACBC currently has more than 100 member organizations, including large mining, oil and gas conglomerates, and the organization is dedicated to promoting business and trade between the two countries.

Dr. William further claimed that Chinese importers are selling-on the relatively cheap Australian iron ore in the Chinese market at South American import prices, and not passing the benefits of cheaper freight rates from Australia onto Australian mining companies.

China's soaring demand for iron ore has sent freight rates sky-high this year, and resulted in iron ore CIF prices to Chinese ports undergoing repeated hikes since the beginning of the year. Moreover, while Chinese importers pay FOB prices to Australian miners, they are selling iron ore at current Brazilian CIF prices in the domestic market, and taking advantage of the huge price difference between freight rates from Australia and Brazil. Freight rates form Brazil to China are approximately two-thirds more than freight rates from Australia to China.

The iron ore freight rate from Brazil's Tubarao to China's Beilun/Baoshan ports hit $85.65 per ton on Oct. 10th, up $3.4 per ton from the previous day, while freight rates from Western Australia to China's Beilun/Baoshan ports reached $36.33 per ton, up $1.49 per ton.

"There are extra profits for the importers at the expense of the Australian iron ore exporter, and the Australian exporters feel they should share some of that profit. Perhaps a compromise and sharing of that profit differential would be a fair solution for the Australian iron ore exporters," Dr. William said.

Hu Kai, senior analyst from Beijing Umetal, a leading domestic steel industry consultancy, told Interfax that as iron ore imports are controlled under license in China, it is common practice for licensed Chinese steel mills and traders to resell imported iron ore to small-scale domestic steel mills at inflated prices, and many of them sell the cheaper Australian iron ore in the spot market at Brazilian iron ore CIF prices. Australian miners are urging Chinese importers to pay a shipping premium, on top of the FOB price, in order to fill the gap between their sale price and the price at which Chinese importers and traders sell iron ore in the domestic Chinese market.

However, the last time Australian miners raised the shipping premium issue in the 2005 contracted benchmark price negotiations, the suggestion was received coldly by Chinese steel mills.

"I think the two main Australian miners (BHP Biliton and Rio Tinto) will again request Chinese steel mills to pay a shipping premium during the 2008 contracted benchmark iron ore price negotiations, as freight costs are on the rise and now make up a significant part of iron ore prices. However, Chinese steel mills will never accept this, and it is futile for the Australian side to decide to change the rules of the game that have been in place for more than 20 years [annual FOB contracted benchmark price negotiations]," Hu said.

The contracted benchmark iron ore price negotiations for 2008 are due to commence in November this year for contracts from April 1, 2008 to March 30, 2009, and both sides are busy building cases to support their own causes.

"The current iron ore price negotiations are front page news in Western Australian and Australian press. I believe the negotiations must recognize that iron ore prices will be determined by the market forces of supply and demand, and within that framework each party should recognize the need to maintain good relations for the sake of long-term business," Dr. William said.

Turkey says export of local defense products to Iran surges
Turkey says export of local defense products to Iran surges
Azerbaijan has potential to preserve qanats in Karabakh - Iranian researcher
Azerbaijan has potential to preserve qanats in Karabakh - Iranian researcher
Azerbaijan can take steps to include its underground water channels into UNESCO list
Azerbaijan can take steps to include its underground water channels into UNESCO list
Loading Bars
Latest
German retail sales rise more than expected before partial lockdown
Uzbekistan to receive observer status in EAEU
Eni revises up Azerbaijan’s gas reserve estimates
Georgia discloses forecast revenue of Tbilisi Transport Company
Azerbaijan talks major restoration work to be carried out on liberated territories
Turkey says export of local defense products to Iran surges
US decreases exports to Kazakhstan year-on-year
World’s gas reserves slightly up y-o-y
Azerbaijan has potential to preserve qanats in Karabakh - Iranian researcher
Azerbaijani MFA talks information about French MPs' planned trip to Karabakh
Azerbaijan to develop transport sector on territories liberated from Armenian occupation
Prices on Azerbaijani oil change
Kazakhstan taking measures to double agriculture goods export via digitalization
Kazakh KazMunayGas to continue improving sustainable dev't activities
Turkmennebit State Concern puts new productive wells into operation
Azerbaijan can take steps to include its underground water channels into UNESCO list
Turkey's October 2020 car exports to France increase
Azerbaijan's AccessBank looks to regain share in agricultural lending
UAE boosts import of defense industry products from Turkey
Uzbek Agriculture Ministry reveals volume of harvested raw cotton
Iranian currency rates for December 2
Trading in shares of Xiaomi halted pending share sale, bond issue statement
Demand for Turkish cars in Kazakhstan increases
Albgaz invites bids for maintenance of TAP section in Albania
Albania ready to offer full range of gas network maintenance services for TAP
Azerbaijani currency rates for Dec. 2
Fuel demand to recover over 2021-2022, while growth rates to soften
Turkmenistan’s Turkmengas plans to increase productivity of wells
Uzbekistan reveals its COVID-19 data for December 2
Cargo traffic to/from Azerbaijan via NSTC carried out regularly
Azerbaijani branch of Romanian IT GRUP talks plans for 2021
OPEC+ failure could be highly detrimental for oil prices
SecGen of OIC sends letter to President of Azerbaijan
Gov't spokesman warns against quick decisions on Iran's nuclear program
Kazakh power networks maintenance company to buy construction materials via tender
Japan ruling party weighs up inheritance tax exemption for foreigners
Iran ready to share scientific achievements with friendly countries
Georgia to increase price of natural gas for commercial consumption starting January
Singapore becomes first country to approve sale of lab-grown meat
Turkey, EU cooperation key to fight hate, discrimination in Europe: Comms Director Altun
683 COVID-19 cases among schoolchildren registered in Kyrgyzstan in 3 months
State-owned enterprises in Georgia lose about 130 mln GEL due to pandemic
Eurozone manufacturing sector expands at slower pace
Borrell highlights terrorist nature of Fakhrizadeh assassination
Kazakhstan invites Hungarian companies to jointly hold geological exploration
Bezos' Blue Origin taps former Pentagon, NASA officials for new advisory board
Ford announces 580 mln USD investment in Argentina
Cement price up in Uzbekistan due to decrease in production volumes
House seen backing bill that could block Chinese firms from U.S. securities markets
Lebanon central bank can keep subsidies for only two more months
Nigerian troops kill 5 gunmen, rescue nine hostages
Israeli archaeologists discover 2,000-year-old game dice
Tesla CEO says he is open to friendly deal with rival carmaker
Uzbekistan’s export of furniture products to Italy down
Iran increases exports from Gilan Province
Kazakhstan’s freight transportation operator opens tender to buy spares
FAA issues new first air certificate for Boeing 737 MAX since 2019
Number of Kyrgyzstan’s recoveries from COVID-19 reaches 64,711 with 560 new ones
Georgia to participate in discussion on Black Sea security at NATO Foreign Ministerial
Bahar Azadi gold coin price rising in Iran
Turkey to start COVID-19 vaccination drive after Dec. 11
COVID-related restriction may complicate procedures for car registration in Georgia
Euronews prepares reportage from Azerbaijani Aghdam liberated from occupation (VIDEO)
AP highlights aspects of Armenian Armed Forces withdrawal from districts of Azerbaijan
Israeli airline conducts 1st commercial passenger flight to UAE
Humiliating prisoners of war is not characteristic of Azerbaijani people - State Security Service
Quarantine regime to affect some investment projects of Kazakh national oil company
Equal number of Russian, Turkish personnel to work in center to control ceasefire in Nagorno-Karabakh
Georgian IT sector to arouse investor interest
Azerbaijani marine infantry personnel return to place of permanent deployment (PHOTO)
Delivery process of logistic support assets for peacekeeping contingent in Azerbaijan continues (PHOTO/VIDEO)
Georgian economy sees decrease due to COVID-19 lockdown
Return of Lachin district by Azerbaijan has not only important political, but also economic significance - Georgian expert
AP publishes article highlighting political success of Azerbaijan over Karabakh conflict
Foreign trade operations between Azerbaijan and Poland up
Georgia reveals details of Fourth Stage of Anti-Crisis Plan
Azerbaijani Culture Minister gives interview to France 24
Gradual liberalization of wholesale and retail electricity markets defined in Georgia
Import of aluminum by Azerbaijan up
Georgia approves volume of external debt planned for 2021
Development of well-functioning gas hub to diversify Georgia’s gas market
Uzbekistan, Belarus eye signing mutual tourism dev’t agreement
Demand for tobacco products in Azerbaijan may decline amid pandemic crisis
UAE based company to grow cannabis in Uzbekistan’s Syrdarya region
Fiat brand to electrify 60% of its models by end-2021
Azerbaijani Finance Ministry auctions state medium-term bonds
Georgian hazelnut-producing company faces with complex logistics
Iranian Energy Exchange announces products to be on sale on December 2
Number of phishing attacks on Azerbaijani web sites down
European culture to have new dimensions with Lachin's liberation - US expert
Enagas working on 12 projects in hydrogen developments
Spanish Enagas moving towards more sustainable energy model
Azerbaijan's mortgage fund puts up new bond tranche for auction
Georgia names number of beneficiaries of discount cards under agro-diesel promotion program
World Bank helps Georgia to purchase equipment in its fight against coronavirus
Italy decreases crude petroleum oil import from Kazakhstan year-on-year
Azerbaijan's minister of transport meets UK ambassador
Municipality of Italy's Milan adopts document in support of Azerbaijan
Ganja teenager won a bronze medal at the International Olympiad in Informatics!
Production at Azerbaijan’s Kursangi, Garabagli fields adjusted under OPEC+ deal
All news