China's acrimonious dispute with big iron ore producers has backfired, with the country's steel mills having to pay prices at times almost 80 per cent higher than those on offer earlier this year.
Negotiations between China and the world's top three iron ore producers - Vale, Rio Tinto and BHP Billiton - ended after failure to agree on a benchmark price that steel mills on the mainland would pay producers.
As a result, Chinese mills have had to pay millions of dollars more buying on the spot or open market instead of at a long-term contract price.
'Last year, spot sales accounted for about 30 per cent of iron ore trades in China, compared with about 60 per cent in 2009,' Clive Murray, chief executive of London Dry Bulk, told Bloomberg.
The China Iron and Steel Association (CISA), which led the talks for the first time this year, was seeking a 45 per cent reduction on 2008-09 prices, even after a 33 per cent cut in benchmark iron ore prices had already been set with steel mills in Japan, South Korea and Taiwan.
CISA felt that as the world's biggest importer, it deserved a bigger reduction. It was also under pressure to secure a favourable outcome, having taken over from Baosteel, the negotiator in the previous year's talks that was regarded as having mishandled them - China's steel mills paid a significant premium to 2007 prices, when they were expecting a discount.