31 Jul 2009 11:29

CISA considering standardizing imported iron ore prices

Shanghai. July 31. INTERFAX-CHINA - The China Iron and Steel Association (CISA) is planning to standardize the prices of imported iron ore sold on the Chinese market in order to curb speculative activities and excessive imports, a senior CISA official was cited as saying by state-run media on July 31.

According to Shanghai Securities News, Shan Shanghua, secretary-general of the CISA, said that once China concludes this year's annual price talks with the world's top three iron ore miners, the benchmark price will apply to all Chinese steel mills, regardless of size or whether it is state or privately owned.

Steel mills without an import license will buy imported iron ore from other steel mills or traders at the benchmark price plus standard commission only.

"A standardized iron ore price would limit chaos in China's imported iron ore market. Steel mills and traders would not stockpile iron ore and would be unable to sell on iron ore at a much higher price, as the commission level will be fixed," Ma Zhongpu, an industry analyst with ChinaCCM.com, said.

"But the implementation of the new rule will require strong government support," Ma said.

Shan was unavailable for comment when reached by Interfax on July 31.

Another CISA official, who asked to remain anonymous, told Interfax that the CISA is still holding out for a bigger reduction in contract iron ore prices from overseas miners. It is doing so because demand has been artificially pushed up by speculative purchases of Chinese mills and traders as well as by consumption from facilities that should be phased out due to outdated technology.

According to the CISA's latest prediction, China's apparent consumption of crude steel will stand between 510 million tons and 540 million tons in 2009.

Vale, the world's largest iron ore miner, agreed to cut long-term iron ore prices for 2009 by 28.2 percent from last year's level with Japanese, South Korean and European steelmakers, while Rio Tinto and BHP Billiton agreed to a 32.95 percent cut.