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China delays issue of permits for Australian ore imports

China delays issue of permits for Australian ore imports

Shanghai: 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, reports the Business Spectator, quoting Chinese trade sources familiar with the situation.

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.

"The customs authority did not say it will not issue the permits for the goods. They (the permits) were just delayed," a source familiar with the situation said, adding, "That only means these ores cannot be cleared by the custom authority right now."

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 reporters that Australian miners were already cutting the volumes delivered under term contracts.

But the chairman of Handan Iron and Steel Group, Liu Rujun, said last week that such cuts would only take effect from April 1 - providing a possible trigger for the import delays. Liu could not be reached for additional comment on Monday.

Australian iron ore exports to China rose 1.3% in January from December. More recent data is not yet available.  [18/03/08]