Federal Trade Minister Simon Crean has criticised a reported call by China for a two-month boycott of iron ore purchases from Rio Tinto and BHP Billiton.
A Chinese report says the China Iron and Steel Association has urged the boycott in protest at what it claims is a price monopoly by Anglo-Australian firms Rio Tinto and BHP Billiton, and Brazil’s Vale.
It follows agreement by other key Asian buyers to accept price increases for three-month deals of up to 100 per cent.
Trade Minister Simon Crean says such a call is contrary to China’s status as a market economy.
“You’ve got to let the market determine the price. You can’t be issuing directives in terms of restricting supply,” he said.
Mr Crean says he does not believe there is a monopoly, but if China is serious it should seek market-based remedies like helping to improve efficiency and iron ore supply from Australia.
“That’s the way you get the balance back between demand and supply. To simply try and do it through central edict defeats the whole purpose of functioning as a market,” he said.
Mr Crean says a boycott is unlikely because demand for iron ore in China is so high.
Agreements by the Asian steelmakers in the iron ore talks have previously served as a benchmark in global negotiations.
China’s commerce ministry told reporters last month the state would support domestic steel mills in their thorny iron ore price negotiations even after the Australian Government bluntly told Beijing to stay out of the talks.
“As the world’s largest iron ore consumer, the interests of Chinese steel mills should be reflected in the negotiations,” commerce ministry spokesman Yao Jian said.