China to have its own iron ore trading platform
23 May 2009
China, the world's biggest iron ore importer is launching an iron ore trading platform on 25 May, which is seen as a move to set up its own iron ore price index in the future to have more say in the global pricing of the mineral.
The iron ore trading platform, RizhaoInternational IronOre TradeCenter located in Shandong Province, is a joint venture by commodity broker Shandong Huaxin and four other domestic companies and will act as a trading platform and clearinghouse for iron ore contracts.
With a registered capital of 20 million yuan ($2.93 million), the Rizhao International will provide electronic commerce services for iron ore suppliers, steel makers, domestic steel plants, and foreign mining firms.
It will also become a benchmark for international trade in iron ore, provide services of trading, information, quality control, warehouse, transportation, insurance and settlements.
The Rizhao International Iron Ore Trade Center would be of great benefit to small Chinese steel makers, who buy iron ore from the many small miners scattered in China as they can ill afford the high prices contracted annually by big steel makers with mining giants like Vale do Rio Doce of Brazil, BHP Billton and Rio Tinto of Australia.
Every year in December, global iron ore mining giants and the world's big steel producers sit down and hammer out an annual price for iron ore.
But this year both parties have yet to reach an agreement on the price since Chinese steelmakers are seeking price cuts of more than 40 per cent on the annual contracts while the miners are not willing to accept a price cut of anything more than 20 per cent. (See: Global iron ore miners locked in pricing battle with China)
The location of the trading centre is also strategic, since Rizhao's port in Shandong province is one of the main iron ore port in China handling 20 per cent of the country's total iron ore import.
Many of the top traders in iron ore are also located in this city as the port has the largest iron ore storage yard in the country and accounted for 76 million tons of iron ore import in 2008.
China, which is the world's largest steel producer and importer of iron ore, had imported nearly half of the world's iron ore export, by importing 443.7 million tons of iron ore in 2008.
