Hail Cisa. The Chinese Iron & Steel Association, the government body speaking for its steel mills, was always going to come out swinging in this year's round of negotiations with iron ore suppliers.
Last year it was stung by the failure of Baosteel, the largest steelmaker, to win the argument on freight costs, settling with the Australians for an average price 14 per cent higher than the Brazilians. Before talks came to a head last month, China had amassed more than 100m tonnes of ore onshore, equivalent to three or four months' of its annual imports. That is not the action of a nation preparing for a speedy settlement. Meanwhile, Rio Tinto, the biggest seller of ore into Asia, appeared to be leading Chinalco, China's would-be metals champion, down the garden path.
A mixture of pique and pride, therefore, has caused Cisa to refuse to accept the average 37 per cent reduction agreed with Japan, Taiwan, Korea and Europe. But by letting the June 30 deadline slip without an agreement, the industry is now in uncharted territory. Rio could theoretically use “drop-dead” clauses for the first time, allowing volumes to be terminated if new prices were not agreed by July. Individual mills might try to circumvent Cisa by paying Australian miners provisional prices to match the Japanese reduction.