May 08, 2012 07:08 PM

Closer Look: New Iron Ore Platform Put to the Test

(Beijing) – China's iron ore spot trading platform started operating on May 8 and quickly saw its first transaction.

The platform's first deal, finished in the morning, was for US$ 145 per ton and involved 165,000 tons.

Promoters say the platform will give China's steelmakers more control over the prices they pay for iron ore, particularly the huge quantities shipped from Australian and Brazilian mines.

It is sponsored by the China Iron and Steel Association (CISA), Beijing International Mining Exchange (BIME) and China Chamber of Commerce of Metals Minerals and Chemicals Importers and Exporters (CCCMC).

The world's four largest iron ore suppliers – BHP Billiton, Rio Tinto, Vale SA and Fortescue Metals Group – are participating. The platform also has 26 founding members, including steelmakers such as Baosteel, Shougang and Hebei Iron and Steel, and trading companies like China Minmetals, Sinosteel and Sinochem International.

Time will tell whether the platform works as intended, but the participation of international iron ore suppliers has eased the concerns of some in the industry. For their part, the international suppliers say pricing should be justifiable and transparent.

China's steel industry is slumping, reflected by the poor sales of international suppliers. For this reason, China's steelmakers hope the platform can set reasonable prices that will help them recover.

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