Iron And Steel Industry: Price Index Wants To Move Ore Suppliers To Seize The Commanding Heights

　　離奇的格價指數

In October 31, 2007, a spokesman for BHP Billiton confirmed that the company was considering the possibility of an iron ore price index and said that a good index could help buyers and sellers.

There is a common understanding of clearing prices, and can help build faster, lighter and less confrontational processes and agree on annual prices.

"It works well in a strong and weak market."

The so-called price index is to determine the price index by comparing the price of India's spot mines to China.

Luo Bingsheng said.

This can not help but worry the market that the traditional benchmark pricing system will change significantly.

BHP Billiton wants to raise the price index. "My steel network" senior analyst of iron ore has said in an interview with reporters: "in the past two years, after the annual iron ore negotiations, the price of the goods rose greatly, and the Australian suppliers felt that they had suffered a great loss because of the increase in sea freight and the promotion of the India mine. The price of the annual agreement did not reflect the market changes. Therefore, the iron ore price index, like the power coal index, was advocated to reflect the market changes flexibly.

The aim is to maximize the benefits of suppliers.

According to Huang Teng, the head of Beijing Long-Trade Consultants Ltd and the coal market research expert, the most important index of thermal coal in the world is two: the Asia Pacific region is mainly based on the BJ international standard spot index of power coal in Newcastle, Australia, and the FOB price index of South Africa's Richard Bay (RB) powered by Global Coal is published in Europe and the United States.

"The former has been carried out for more than 10 years and is scheduled to be published every Thursday in Newcastle port, which has long been accepted by the big coal importers in Asia; the latter is the new index for the two years, but its influence is expanding."

Huang Teng told reporters.

BHP Billiton is also clearly interested in expanding its influence as a supplier of bulk products by "index".

In June 23rd, after Rio reached an agreement price with China's steel mill, BHP Billiton CEO Marius Kloppers published the view that "trading price is linked to price index". The pricing mechanism of iron ore should refer to the pricing of other metal resources, and once again called for the adoption of an index pricing system.

China Steel Association immediately issued a statement on the official website in June 30th, saying, "this is a total negation of the existing iron ore negotiation mechanism, which is not conducive to establishing long-term and stable cooperative relations between the supplier and the buyer".

BHP Billiton has already sold iron ore in the new OTC market in Credit Suisse and Deutsche Bank, even though you are coming to the final stage on the negotiating table.

According to reporters, Credit Suisse Bank and Deutsche Bank launched the cash settlement of the iron ore field in May this year.

The paction was delivered according to the iron ore price index of China's spot market released by SBB and Metal Bulletin.

Kamal Naqvi, director of commodity banking at Credit Suisse, told SBB in June: "almost including iron ore producers, steel producers, hedges.

Trading with all major customers of pension funds.

About 1 million 500 thousand tonnes of iron ore have been traded and traded from the third quarter of 2008 to the fourth quarter of 2009.

However, a recent market analyst told reporters: "now it is not optimistic, because the market is relatively low."

Steel mills and mines are relatively conservative.

Tina, a SBB research analyst, told reporters in July 25th: "we only serve as information providers to issue weekly CIF prices for 63% grade India mines to China. The specific operation of the index is carried out by two banks."

　　隱憂與趨勢

Although BHP has called for a flexible tracking price change tool, some banks and exchanges have responded, but many domestic experts believe that the main steelworks will not participate in the system.

The BHP Billiton confirmed the matter last year and said: "the iron ore price index" represents "great progress in the long-term pricing mechanism, and will not undermine the basic nature of supply security and relations".

"My understanding is that they do not want to break away from long-term contracts and want to sell spot prices.

Now that the ore is in the rising channel, how can we face the advantages of such a unilateral way?

Hu Kai, chief analyst of the joint metal net iron ore, said: "the iron ore index is unlikely to be pushed strongly. For the Japanese and Japanese steel mills without 1 tons of spot ore, they will definitely not accept it.

China has clearly expressed its opposition, and Europe's imports from the two expansion are less likely. "

China's steel mills also questioned the feasibility of the index system from the technical level, because the quality and chemical properties of iron ore vary greatly, and its index system may not be practical.

For example, for pellets and sinter, the index may be feasible, but because of its low volume of pactions, index trading is of little significance.

Huang Teng also told reporters: "if the iron ore index is to be launched, there must be a strict definition.

Just like different coal products, there is only one kind of power coal index, and there are very strict regulations and definitions. "

For China Steel Association, which represents a total of 80% production capacity in China, what is more intolerable may lie in the double "injury" of negotiation mechanism and cost.

Luo Bingsheng stressed: "when the three big mining companies monopolize the resources of more than 70% of the global iron ore shipping trade resources, the price index will be very favorable for the suppliers to manipulate the market price, which will cause great harm to the buyers.

Therefore, we are firmly opposed to the iron ore price index. "

In fact, from the past few years' experience, we can see that spot prices will rise after the end of each price negotiation.

But on the other hand, Zeng Sheng Sheng thinks that BHP Billiton advocates pricing based on price index instead of traditional annual price negotiation.

"Practically speaking, the current negotiation mechanism has many defects and can not reflect the timely changes in the market. In the future, it must be replaced by new mechanisms.

But from now on, there is not an appropriate mechanism accepted by all parties. The traditional price negotiation mechanism can not be broken at once, which requires a pition and adaptation process.

In the coming years, the traditional annual negotiation mechanism will continue to exist, but its impact will gradually weaken, and spot price and flexible price mechanism will coexist with the original mechanism.

Mr Chan said.

When the price of ore is still rising, the introduction of the index is obviously unfavorable to the steel mill, otherwise the mine will be damaged.

"But in the long run, the overall average profit of commodities will not be excessive or profitable."

Huang Teng also told reporters that "strictly defining the price index to measure spot pactions, thus reflecting the true relationship between market supply and demand, is indeed a more objective criterion for judging."

However, concerns about how BHP Billiton or other institutions will "define" and whether it is reasonable or not is one of the concerns of China.

According to reporters, SBB has started research at the end of last year, and is preparing to launch its own iron ore price index.

And "my steel" is now working on it.

And build models.

According to Zeng Jie Sheng, "Macquarie Bank is very interested in this, but whether it has been launched or not has yet to be determined. It depends on the measures of the supplier and the reaction of the Chinese side."

When reporters called their Samantha Evans on July 25th about BHP's iron ore price index's progress and preparation, she said: "we will not comment on all current iron ore price indices."