China Steel Association questioned quarterly pricing based on proposed ore price binding steel prices

Since the three major miners have thrown out the concept of quarterly pricing, China has consistently expressed its clear-cut opposition from steel mills to the China Iron and Steel Association and to the Ministry of Industry and Information Technology of the competent government. They believe that quarterly pricing is a short-term pricing act and the iron ore pricing cycle should still be For the year, the two parties signed a long-term agreement price. The quarterly pricing of iron ore transactions is a sensible option for both sides of the trading market during the turbulent period. The Chinese Steel Association is opposed to the quarterly pricing basis. Iron ore's index quarterly pricing model is a discriminatory approach toward Chinese steel mills.

Questioning the existence of speculative elements in the pricing of iron ore indices, the China Iron and Steel Association has thrown out the idea of ​​determining the price of iron ore agreements on the basis of steel prices, and the three major miners have not responded positively. In order to cope with the high cost of ore, China will increase scrap recycling efforts and increase the production of domestic iron ore. The quantity of iron ore imported by China in 2010 will not exceed 2009, and the basis for the increase in ore prices is not solid.

The index quarterly pricing mechanism has not been communicated systematically by the majority of iron ore users, and the mines have been forced to implement in the short term, which has caused the global iron ore trade order to become chaotic. This has added to difficulties in the implementation of production plans for the supply and demand sides and the formulation of long-term strategies by both parties. It has brought about many unpredictable and unpredictable impacts on the steel industry and its downstream industries. It has broken the industrial chain balance relationship between the iron ore production enterprises, steel companies, and steel users. This kind of delinked pricing model has been accepted by all question.

Current basis for quarterly pricing The Platts Index is based on the spot price of imported ore in the Chinese market, but domestic spot imports only account for 20% of the total amount of imported ores, and their prices are insufficient to represent the actual supply and demand situation in the Chinese market. In addition, the index is based on the price of the trader's quote, there is a big difference between the quoted price and the transaction price, there is a big speculation component. According to Shan Shanghua's analysis, there are three variables affecting the fairness of the index pricing. One is the spot price of iron ore in China, the second is the fluctuation of ocean freight, and the third is the premium of quality. All these problems exist and lack representativeness.

The China Steel Association (CISA) called on both sides of iron ore supply and demand to explore a more scientific pricing mechanism. According to its research, the price of iron ore should be linked to the price of primary steel products (hot rolled steel, coils, building materials, etc.). In view of the fact that iron ore is only an intermediate commodity, it is only through iron-making steel-making and steel-rolling that it can become a real commodity and serve the society and can realize its value. Therefore, ore can only reflect the value through a single material, iron ore price should fluctuate with the price of primary timber. According to reports, the cost of primary steel products constitutes 30% of iron ore.

China Iron and Steel Association said that the price index of primary materials is more extensive than the price index of ore. Many consulting agencies around the world provide steel price indices around the world every day. Among them, the China Steel Association price index covers all varieties and priorities. area. The association believes that which steel price index to choose is more reasonable and authoritative can be discussed, but the steel industry chain will inevitably return to an environment of shared benefit and risk sharing.

There is no fundamental change in the supply and demand of iron ore

Before the year 2000, iron ore in the world was in a state of serious oversupply. There have been major changes since the 21st century. From 2000 to 2009, the world’s steel output rose from 570 million tons to 900 million tons, and its China’s growth from 120 million tons was 540 million tons. More than global growth, indicating that production in other countries is declining. China consumed 860 million tons of finished ore in 2009, an increase of 660 million tons over 2000, while other countries’ demand decreased by 110 million tons. Global iron ore in 2000 The output of 950 million tons of rock has grown to 1.72 billion tons in 2008. Affected by the financial crisis, iron ore production in 2009 dropped to 1.5 billion tons.

The overall supply and demand relationship of iron ore has not changed. In 2010, the total pig iron produced in the world was 550 million tons, which was a year-on-year increase of 23% and only 6% higher than in 2008. After deducting the Chinese factor, the global pig iron production still fell compared with 2008.