An insider of Shougang believes that iron ore now has financial attributes, but it has been unusually strong in this round of international commodity slump. The major reason why Chinese companies import iron ore is a major reason. A large-scale steel company in eastern China told reporters that, thanks to the extent of iron ore financialization is not yet deep, if fully financialized in the future, Chinese steel prices are even more at the mercy of people.
In the recent collapse of international commodities, iron ore prices, which mainly come from the three major mining giants, remain high, engulfing the profits of Chinese steel companies.
From the exclusion of iron ore index pricing to the brewing of its own iron ore index, the China Iron and Steel Association has spent more than two years.
At the same time, Li Xinchuang, Director of China Metallurgical Industry Planning Institute, who also served in the China Iron and Steel Association, said in an interview with reporters on May 15 that China Iron and Steel Association is planning to establish an authoritative Chinese iron ore price index. The domestic ore price index will also introduce an import ore price index in the future.
"This matter is currently being studied. Can it be launched in June? I also said it is not good." Li Xinchuang said.
Informed sources said that the iron ore index is required by the National Development and Reform Commission for the Chinese Steel Association to take out as soon as possible to ease the passive situation in the iron ore negotiations.
Xu Xu, chairman of the China Minmetals Chemicals Import & Export Chamber of Commerce, once stated that in order to respond positively to the new situation of iron ore indexation, China should step up the development of a Chinese iron ore index with great influence and authority.
The Ministry of Commerce had previously stated that China’s pricing power under the international trading system has almost completely collapsed. One of the major problems China currently faces is the lack of pricing power for commodities.
China Steel Association and China Minmetals Chemicals import and export traders played a very good role in coordinating the process of manufacturers and traders. As the competent department of import and export trade, the Ministry of Commerce will give reasonable advice to the two associations.
The industry is not optimistic about the Chinese version of the index for the upcoming "official version" of the iron ore index, some industry insiders do not agree: "You do not have the right to speak, foreign miners will simply not recognize the index."
A middle-level manager of a large steel company in eastern China told reporters that, in fact, most steel companies currently purchase iron ore from the spot market. The three major international iron ore giants have too strong say, and Chinese steel companies have no bargaining power at all. .
“Only some of the major steel companies are buying iron ore in the three major mining quarters,†said the middle manager.
According to report, according to the quarterly pricing of iron ore, each ton will be 160 to 170 yuan cheaper than spot iron ore, but this spread is shrinking.
The middle manager thinks: “The three major mines are more and more inclined to make monthly pricing and sell iron ore at spot prices. After that, Chinese steel companies may only have cash available for purchase.â€
From April 2010 onwards, the iron ore annual negotiation pricing model, which has been in force for more than 20 years, was forcibly changed from Vale, Rio Tinto and BHP Billiton to quarterly pricing and index pricing.
For the upcoming "official version" of the iron ore index, the middle manager did not agree: "You don't have the right to speak. Foreign miners will not recognize this index at all."
In fact, since 2002, the price of imported iron ore has increased from less than 30 US dollars per ton to nearly 200 US dollars, while the steel price has only increased from about 2,000 yuan to the current 4400 yuan. This is the fundamental reason why steel companies are in a loss state.
“In the international market, although China accounts for 65% of the import volume of iron ore, it has no say,†said Yao Jian, spokesman of the Ministry of Commerce. In fact, it is not only iron ore, but also petroleum, copper, and food commodities. Imports also face a similar situation.
At present, the only basis for the pricing of iron ore is the Platts Index, because its prices are mainly derived from the three major mines, which leaves Chinese companies with no room for bargaining in front of their opponents.
The former Secretary-General of China Iron and Steel Association, Shan Shanghua, once stated that any index that can be used by mines is unfavorable to Chinese steel mills.
At present, there are three major iron ore indexes in the world. They are the TSI index of Global Steel (SBB, the parent company of the steel index), the MBIO index of the Metal Bulletin (Platinum), and the Platts index of Platts. On the basis of the three major indices mentioned above, since 2009, the Singapore Exchange and the Chicago Mercantile Exchange have successively launched iron ore swap transactions.
Industry expert Hou Zhixuan told reporters that, in fact, the ore price calculated by the Platts index is higher by 2 US dollars per ton than the MBIO index price. This is also why the index is favored by the three major mines.
“We have to refer to foreign indices now. There is no way to do this. The three major mines are willing to be priced according to the index. Which kind of index is not referenced by the steel mills?†said the middle-level manager of a large steel company in East China.
Commodity plummets Iron ore prices firm The price of iron ore, which is still at a high price, has devastated the profits of Chinese steel companies. The profit margin of product sales of 77 large and medium-sized enterprises that were included in the first quarter of the China Iron and Steel Association's statistics was only 2.91%, which was 3.29 percentage points lower than the average national industrial profit margin of 6.2%. The profits of any of the three major iron ore giants exceed the sum of profits of the Chinese steel industry.
In May, international commodity prices have all “divedâ€. However, it is worth noting that the price of iron ore is quite stable.
Hou Zhixuan told reporters that imported iron ore was briefly reduced by more than 10 US dollars each in March, but it rose again to 188 to 190 US dollars in April.
According to the reporter’s understanding, even in the midst of the collapse of international commodity prices, the price of iron ore remained strong, with a maximum of US$2 per ton, and concentrated in low-quality iron ore.
An insider of Shougang believes that iron ore now has financial attributes, but it has been unusually strong in this round of international commodity slump. The major reason why Chinese companies import iron ore is a major reason.
The industry information released by China Iron and Steel Association on April 29 shows that in the first quarter of this year, iron ore imports were 17.717 million tons, and the average import CIF price was US$156.62/ton, which was a year-on-year increase of US$60.31/ton, or 62.62%.
Hou Zhiyu told reporters that according to China's crude steel production estimated from January to April, China's crude steel production this year will reach an astonishing 680 million tons. This will consume a lot of iron ore.
The price of iron ore, which is still at a high price, has seriously swallowed up the profits of Chinese steel companies. The profit margin of product sales of 77 large and medium-sized enterprises that were included in the first quarter of the China Iron and Steel Association's statistics was only 2.91%, which was 3.29 percentage points lower than the average national industrial profit margin of 6.2%. The profits of any of the three major iron ore giants exceed the sum of profits of the Chinese steel industry.
"The price is so high, but also imports so much. How could the price of iron ore fall? The excess capacity of the Chinese steel industry is really too great." Hou Zhijun thinks.
According to the data of the United Nations Goods Trade Statistics Database, the top five commodities imported by China are integrated circuits, crude oil, iron ore and concentrates, liquid crystal and optical components, and automatic data processing equipment. Within a short span of 10 years, iron ore has risen steadily from 20 to 3 in China's imports, and has risen to become the 3rd most important imported commodity in China.
The above-mentioned mid-level manager of a large steel company in East China told this reporter that fortunately, the extent of iron ore financialization is not yet deep. If it is fully financialized in the future, Chinese steel companies will be at the mercy of prices.
In the recent collapse of international commodities, iron ore prices, which mainly come from the three major mining giants, remain high, engulfing the profits of Chinese steel companies.
From the exclusion of iron ore index pricing to the brewing of its own iron ore index, the China Iron and Steel Association has spent more than two years.
At the same time, Li Xinchuang, Director of China Metallurgical Industry Planning Institute, who also served in the China Iron and Steel Association, said in an interview with reporters on May 15 that China Iron and Steel Association is planning to establish an authoritative Chinese iron ore price index. The domestic ore price index will also introduce an import ore price index in the future.
"This matter is currently being studied. Can it be launched in June? I also said it is not good." Li Xinchuang said.
Informed sources said that the iron ore index is required by the National Development and Reform Commission for the Chinese Steel Association to take out as soon as possible to ease the passive situation in the iron ore negotiations.
Xu Xu, chairman of the China Minmetals Chemicals Import & Export Chamber of Commerce, once stated that in order to respond positively to the new situation of iron ore indexation, China should step up the development of a Chinese iron ore index with great influence and authority.
The Ministry of Commerce had previously stated that China’s pricing power under the international trading system has almost completely collapsed. One of the major problems China currently faces is the lack of pricing power for commodities.
China Steel Association and China Minmetals Chemicals import and export traders played a very good role in coordinating the process of manufacturers and traders. As the competent department of import and export trade, the Ministry of Commerce will give reasonable advice to the two associations.
The industry is not optimistic about the Chinese version of the index for the upcoming "official version" of the iron ore index, some industry insiders do not agree: "You do not have the right to speak, foreign miners will simply not recognize the index."
A middle-level manager of a large steel company in eastern China told reporters that, in fact, most steel companies currently purchase iron ore from the spot market. The three major international iron ore giants have too strong say, and Chinese steel companies have no bargaining power at all. .
“Only some of the major steel companies are buying iron ore in the three major mining quarters,†said the middle manager.
According to report, according to the quarterly pricing of iron ore, each ton will be 160 to 170 yuan cheaper than spot iron ore, but this spread is shrinking.
The middle manager thinks: “The three major mines are more and more inclined to make monthly pricing and sell iron ore at spot prices. After that, Chinese steel companies may only have cash available for purchase.â€
From April 2010 onwards, the iron ore annual negotiation pricing model, which has been in force for more than 20 years, was forcibly changed from Vale, Rio Tinto and BHP Billiton to quarterly pricing and index pricing.
For the upcoming "official version" of the iron ore index, the middle manager did not agree: "You don't have the right to speak. Foreign miners will not recognize this index at all."
In fact, since 2002, the price of imported iron ore has increased from less than 30 US dollars per ton to nearly 200 US dollars, while the steel price has only increased from about 2,000 yuan to the current 4400 yuan. This is the fundamental reason why steel companies are in a loss state.
“In the international market, although China accounts for 65% of the import volume of iron ore, it has no say,†said Yao Jian, spokesman of the Ministry of Commerce. In fact, it is not only iron ore, but also petroleum, copper, and food commodities. Imports also face a similar situation.
At present, the only basis for the pricing of iron ore is the Platts Index, because its prices are mainly derived from the three major mines, which leaves Chinese companies with no room for bargaining in front of their opponents.
The former Secretary-General of China Iron and Steel Association, Shan Shanghua, once stated that any index that can be used by mines is unfavorable to Chinese steel mills.
At present, there are three major iron ore indexes in the world. They are the TSI index of Global Steel (SBB, the parent company of the steel index), the MBIO index of the Metal Bulletin (Platinum), and the Platts index of Platts. On the basis of the three major indices mentioned above, since 2009, the Singapore Exchange and the Chicago Mercantile Exchange have successively launched iron ore swap transactions.
Industry expert Hou Zhixuan told reporters that, in fact, the ore price calculated by the Platts index is higher by 2 US dollars per ton than the MBIO index price. This is also why the index is favored by the three major mines.
“We have to refer to foreign indices now. There is no way to do this. The three major mines are willing to be priced according to the index. Which kind of index is not referenced by the steel mills?†said the middle-level manager of a large steel company in East China.
Commodity plummets Iron ore prices firm The price of iron ore, which is still at a high price, has devastated the profits of Chinese steel companies. The profit margin of product sales of 77 large and medium-sized enterprises that were included in the first quarter of the China Iron and Steel Association's statistics was only 2.91%, which was 3.29 percentage points lower than the average national industrial profit margin of 6.2%. The profits of any of the three major iron ore giants exceed the sum of profits of the Chinese steel industry.
In May, international commodity prices have all “divedâ€. However, it is worth noting that the price of iron ore is quite stable.
Hou Zhixuan told reporters that imported iron ore was briefly reduced by more than 10 US dollars each in March, but it rose again to 188 to 190 US dollars in April.
According to the reporter’s understanding, even in the midst of the collapse of international commodity prices, the price of iron ore remained strong, with a maximum of US$2 per ton, and concentrated in low-quality iron ore.
An insider of Shougang believes that iron ore now has financial attributes, but it has been unusually strong in this round of international commodity slump. The major reason why Chinese companies import iron ore is a major reason.
The industry information released by China Iron and Steel Association on April 29 shows that in the first quarter of this year, iron ore imports were 17.717 million tons, and the average import CIF price was US$156.62/ton, which was a year-on-year increase of US$60.31/ton, or 62.62%.
Hou Zhiyu told reporters that according to China's crude steel production estimated from January to April, China's crude steel production this year will reach an astonishing 680 million tons. This will consume a lot of iron ore.
The price of iron ore, which is still at a high price, has seriously swallowed up the profits of Chinese steel companies. The profit margin of product sales of 77 large and medium-sized enterprises that were included in the first quarter of the China Iron and Steel Association's statistics was only 2.91%, which was 3.29 percentage points lower than the average national industrial profit margin of 6.2%. The profits of any of the three major iron ore giants exceed the sum of profits of the Chinese steel industry.
"The price is so high, but also imports so much. How could the price of iron ore fall? The excess capacity of the Chinese steel industry is really too great." Hou Zhijun thinks.
According to the data of the United Nations Goods Trade Statistics Database, the top five commodities imported by China are integrated circuits, crude oil, iron ore and concentrates, liquid crystal and optical components, and automatic data processing equipment. Within a short span of 10 years, iron ore has risen steadily from 20 to 3 in China's imports, and has risen to become the 3rd most important imported commodity in China.
The above-mentioned mid-level manager of a large steel company in East China told this reporter that fortunately, the extent of iron ore financialization is not yet deep. If it is fully financialized in the future, Chinese steel companies will be at the mercy of prices.
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