Rizhao Steel Holding Group said Friday it would file a lawsuit against Australian iron ore company Mount Gibson, after being ordered by an arbitrator to compensate the miner for breach of contract.

Rizhao Steel, which is based in east China's Shandong Province, disagreed with the arbitration ruling and will institute legal proceedings in an Australian court, asking for the withdrawal of the ruling.

A board member of Rizhao Steel told Xinhua that “We had imported a batch of 45 cargoes of iron ore after the contract, but only two cargoes of iron ore met production standards. The substandard iron ore had increased the production costs and resulted in reduced profits. Besides, it also caused environmental problems which led to warnings from the local environmental protection bureau. We had requested, several times, that Mount Gibson supply us better quality iron ore. However, the situation did not change later, so in September 2008 we refused to take in iron ore from Mount Gibson.”

He denied that Rizhao Steel breached the agreements as, according to him, Mount Gibson terminated the contract in November 2008.

He told “We have hired legal experts to analyze and evaluate the arbitration ruling and will seek a fair solution.”

Rizhao Stee signed a 15 year iron ore supply contract with the Australian miner in June 2007, according to which, Rizhao Steel imports 2.4 million tonnes of iron ore from Mount Gibson every year. However, Rizhao Steel suspended the imports in September 2008 as the company found the iron ore Mount Gibson supplied were substandard. Rizhao Steel was ordered to pay Mount Gibson 114 million U.S. dollars, plus 6% of interest and legal costs, for repudiating its obligations under long term agreements for iron ore supplies.

Contract breaches were a result of the 2008 global financial crisis, during which the market prices of iron ore dropped below the negotiated long-term prices. Therefore, many steel companies tore up agreements with miners to seek low price iron ore.

(Sourced from english.cri.cn)