China has the largest number of iron ore importers in the world. Analysts say the lack of integration and irrational speculation are the main causes of difficulties in iron ore talks.

China imports a huge amount of iron ore every year. However, the unbalanced development of the industry has caused problems.

Zhou Xizeng, Analyst of CITIC Securities said "There are about 120 qualified importers in China. They import nearly 500 million tons of iron ore each year. But distribution among these importers is not well proportioned."

Xu Xiangchun, Analyst said "It just looks like shopping in the market. If I buy more, I will have the opportunity to bargain with vendors and get a better discount. We hope that situation can also happen in iron ore talks. However, our efforts have not resulted in enough progress so far."

In Japan, top steel makers have much better industrial integration compared with their Chinese counterparts. Analysts say due to the separate distribution, Chinese steel makers didn't work together in iron ore talks.

Meanwhile, nearly all importers with long-term contracts have been speculating iron ore in the domestic market. This kind of faction has given suppliers the chance to raise prices over and over again.

Xu Xiangchun said "These importers make price inquires with suppliers separately. This has magnified the demand, and has let suppliers take advantage of the situation. This is the reason why we were negative in the iron ore talks."

Furthermore, companies which bought iron ore through spot transactions didn't use the material for production. Instead, they stockpiled the iron ore to sell it on the market themselves.

By the end of June, there was more than 70 million tons of iron ore stockpiled at harbors. The speculation has seriously affected China's domestic market supply.

(CCTV July 21, 2009)