FMG first foreign miner to join China iron ore exchange
Shanghai. March 21. INTERFAX-CHINA - Fortescue Metals Group (FMG) this week became the first foreign miner to join China's new iron ore exchange, shortly after two of the country's major industry associations started restricting their members from participating in a rival platform backed by BHP Billiton in Singapore.
Australia's third-largest miner FMG joined the China platform on Tuesday, said a statement from the operator, China Beijing International Mining Exchange (CBMX). China established the exchange in January, shortly after the GlobalOre platform was set up in Singapore late last year.
But to join GlobalOre members of the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters (CCCMC) and China Iron and Steel Association (CISA) must now obtain approval from the associations, industry news portals in China reported March 8.
"Although miners may prefer to use platforms in more financially-developed locations such as Singapore, the absence of world's largest buyer is pushing them towards China's exchange," said He Rongliang, a researcher with state-owned consultancy Distribution Productivity Promotion Center of China Commerce (DPPCCC).
FMG's need for a new sales channel as it ramps up output in coming years may be part of the reason it joined the China platform before other overseas players, Umetals analyst Zhang Jiabing told Interfax. By 2015, the firm aims to triple its capacity and produce 155 million tons of iron ore per year.
The big three global miners - BHP, Rio Tinto and Vale - are in talks with the exchange and FMG's decision will speed up CBMX's negotiations with Vale, which is likely to be the most open to participation, Zhang noted.
The involvement of more global miners is still necessary given that FMG supplies only one type of relatively low-grade ore with 56 to 59 percent iron content.
Analysts think it unlikely that Japanese and South Korean steelmakers will join the platform as they largely use quarterly contracts and rarely buy on the spot market, said DPPCCC's He.
CBMX regulations relating to shipment deliveries could also make it more difficult for steelmakers from the two countries to participate, noted Zhang,
The 26 major Chinese steelmakers and metals traders who are currently members of the exchange include Baosteel, Shougang, Minmetals and Sinosteel.
-KHM
