China seeks greater say on iron ore prices
Beijing is pushing for a greater say in setting the price of iron ore, just as Australia¡¯s most important export earner hovers near eight-months low.
The Ministry of Industry and Information Technology - the Chinese agency in charge of the steel industry - held a meeting last week in Beijing that included major steelmakers to discuss how to better influence the price.
¡®¡®We need to take advantage of the slowing import growth [of iron ore] and declining price to push for a more equitable iron ore price mechanism,¡¯¡¯ a statement on the ministry¡¯s website says.
It is not clear which pricing system - such as a return to the annual contract price or spot market price - Chinese authorities want to pursue.
Advertisement Ministry officials in charge of the steel industry told Chinese media that the decline in the price of iron ore presented a good opportunity to readjust the pricing mechanism.
The new pricing mechanism should be market-based; the ministry will not impose its will,officials said.
There has been market speculation that the semi-official China Iron and Steel Association - the body representing the steel industry - wants a return to the annual contract price, under which miners and steel mills negotiated iron ore prices in advance for the entire year.
But CISA stopped short of endorsing that policy position in a recent interview and said it supported Chinese steel mills¡¯ effort to find the most appropriate pricing arrangement with their own suppliers.
Korean steel giant Posco recently indicated its intention to return to an annual benchmark price.
Posco chief executive Chung Joon-yang said steelmakers needed the predictability that the former annual contract system provided, allowing steel mills to plan ahead more confidently, according to Reuters.
"We hope Vale and others will go back to the old system [of annual pricing], Mr Chung said.That way [steel] companies are more stable. Other steel companies want to go back to the old system
At the same meeting, the ministry also wants an expanded role for the Chinese spot market trading platform, where iron ore shipments are traded at the prevailing market price of the day.
China launched such an iron-ore trading system in January in an effort to exert greater influence over international prices for the key commodity.