Iron ore price "contending battle": China has a long way to go

It would seem that it would not be an exaggeration to describe China’s confidence and determination in its struggle for iron ore prices after “failed and repeated defeat” after “failure in battle”. At present, China's iron ore spot trading platform, which has only started for more than a month, is encountering no international major mines. This may be a fatal blow for China, who wants to win the right to speak in the iron ore field. .

Since the "long agreement price" for iron ore was replaced by a third-party index, domestic steel companies have been suffering from high iron ore prices. In the face of the “old crisis” of Chinese steel companies, domestic companies have tried to crack it in a variety of ways, but the results are not satisfactory. After painstakingly stumping, the industry aimed at the breakthrough in the resolution of iron ore enthalpy on the right to formulate prices. Since then, the Chinese iron ore spot trading platform has emerged.

The platform initiated by the China Iron and Steel Association, the Minmetals Chamber of Commerce and the North Mine has been responded to by 26 major domestic steel mills and traders. Baosteel, Angang, Wuhan Iron and Steel, Shougang, China Steel, Hebei Iron and Steel, and China National Minerals Co., Ltd. are all listed. According to the introduction of the North Mine, the main varieties of the platform trading are the mainstream 63.5% fine ore, 62% fines, 65% pellets, 62% ore and other varieties, and are divided into two kinds of in-transit spot and port spot prices. .

At present, information revealed from the North Mine shows that since the launch of the Chinese iron ore trading platform, the North Mining Institute has held several meetings and negotiations with Rio Tinto, Vale, and Australia’s fourth-largest mine, FMG, in hopes of lobbying the mines. Joined as a member, but these international giants are watching and do not show a very strong will.

At the same time, BHP Billiton, one of the three major mines, is in full swing to create a Global ORE platform that is similar in function to the Chinese spot trading platform in Singapore, in order to “set the stage” with China. The operating model of this platform is similar to that of China and adopts a membership system. The shareholder structure includes 40% for steel mills, 40% for mines, and 20% for traders. The mining giant hopes to use this index to dominate the international iron ore price trend.

In the face of the siege of international giants, China’s task of competing for iron ore prices is indeed a long way to go. Data show that in 2011 China imported 690 million tons of iron ore, of which, the amount of iron ore imported from Australia was nearly 300 million tons, close to half of China’s total foreign imports. Obviously, as the world's largest import market for iron ore, it is both necessary and reasonable to establish a spot trading platform. Moreover, the biggest difference between the platform launched by the North Mine and the Global ORE is the use of domestic conditions to establish a port spot trading method. At present, the size of this market is considerable. Before the Spring Festival, the stockpiles of iron ore in China's major ports were nearly 100 million tons.

So far, everyone understands that the key to the success of domestic iron ore trading platforms in the face of China's iron ore fields, which are heavily dependent on imports, depends on the industry’s coverage rate, transaction size, and authority. To achieve this goal, both supply and demand are indispensable. This means that only China's steel mills, traders, and large-scale iron ore import support are still far from sufficient. The support and cooperation of the three monopoly mines is the key to the success of this platform.

Judging from the current situation, dividing and conquering the three major mines may be one of the most effective ways to solve this problem. Brazil’s Vale may be a breakthrough for China. Prior to this, Vale had always hoped that its 400,000-ton bulk carrier could be docked in a Chinese port and set up a distribution center in China. However, at the beginning of February, the Ministry of Transport issued the “Circular on Adjusting the Over-design Regulations for the Vessels' Vessels' Berthing”, cancelling the “berthing power” of this super-large ship, such as Vale, and making its plans obstructed. The “chips” negotiating with Vale requires the wisdom of relevant domestic departments; in addition, FMG, which is also a large-scale iron ore company in Australia, can also become a “paving stone” for China to develop iron ore platforms.

In a word, whoever controls the spot market data release right, whoever will grasp the initiative of future pricing; China still has a long way to go in the battle for international iron ore price.