You almost get the impression that the Chinese steelmakers are trying to shoot themselves in the foot.

With most steelmakers in Japan and South Korea having agreed with their big iron ore suppliers -- I'm speaking of the likes of Vale (NYSE: VALE), Rio Tinto (NYSE: RTP), and BHP Billiton (NYSE: BHP) -- on price cuts of 28% to 33%, the Chinese have now passed the expected Tuesday deadline for establishing this year's final benchmark price. At this point, there is no sign of capitulation on the part of the bigger Chinese manufacturers, most of who appear to be holding out for cuts of 40% or more.

The Chinese manufacturers, via the China Iron and Steel Association, began negotiating with the iron ore miners at a time when commodities prices had taken a bath. At that time, the steelmakers were looking for conditions to work to their advantage, such that they might be granted as much as half off last year's prices.

But now, with steel demand having been boosted by China's own stimulus package and Chinese output rebounding, smaller steelmakers have struck side deals while the nation's bigger steelmakers have been forced to access the spot markets. This has led to increases in both ore imports and prices.

This is occurring as Aluminum Corp. of China (NYSE: ACH), or Chinalco, was ready to make a $19.5 billion investment in Rio Tinto in order to help the London-based miner repay some acquisition loans. However, at the 11th hour, Rio Tinto decided to conduct a rights issue and to form an iron ore joint venture with BHP.

In the process, the company raised $21 billion and has obviated the need for help from Chinalco. It now appears, however, that Chinalco has participated in the rights offering to preserve its current 9% stake in Rio Tinto.  

I'm a believer that most of the commodities provided by Rio Tinto will slowly return to higher levels. On that basis, I'd carefully watch the company: It's a process that could lead to some Foolish profits.

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