China Steel Group Urges Iron-Ore Boycott

A Chinese steel-industry trade group, outraged by a new pricing regime, asks its members to refrain from buying iron ore from Vale, BHP Billiton or Rio Tinto.
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NEW YORK (TheStreet) -- A trade group representing the Chinese steel industry told its members to boycott iron ore from Vale (VALE) - Get Report, BHP Billiton (BHP) - Get Report and Rio Tinto (RTP) for two months, in protest over the new short-term pricing regime recently forced home by the world's three biggest iron ore extractors.

The trade group, the China Iron and Steel Association, said that the country had more than enough iron ore stockpiled in reserves to cover that two-month period. According to a government news web site, ChinaNet, those reserves stand at 75 million tons.

Some observers have already called the bluff. "Given the Chinese reliance on the seaborne market, we calculate that the country will need to import approximately 70% of the material that it consumes in 2010," wrote Anthony Rizzuto, mining and metals analyst at Dahlman Rose. "We believe that it is unlikely that Chinese mills will be able to adhere to this request."

Last week, BHP Billiton and Vale

both struck supply deals

with steelmakers in Japan and Korea, increasing the price of iron ore by 90% (to $105 a ton) from the 2009 level. Moreover, the miners were able to convince their customers to move to a quarterly pricing system,

ending the industry's 40-year reliance on an annual contract that locked in prices for a year

.

The moves have pit iron-ore suppliers against their steelmaking customers. A European steel group, Eurofer, has also protested the pricing moves by

lodging complaints with the European Union anti-competition regulators

.

-- Written by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.