When to fight for iron ore pricing right

At present, it seems that the international iron ore giants are not reconciled to the current price level, and may seek to rise. In the near future, this trend of slowing demand may create opportunities for China to participate in iron ore pricing. We appeal to industry players. To actively fight for iron ore prices.

The international iron ore mine giants seem to be interested in seeking an increase in iron ore prices. In recent days, Brazil's Vale claimed that iron ore prices are bullish, despite the apparent improvement in demand for iron ore after the Spring Festival this year. Martin Vals, Vale’s director of ferrous metals and strategy, said on Thursday that iron ore prices are currently stable at around US$140 per tonne but may rise in the second quarter, as activity in the Chinese construction industry is expected to accelerate at that time. He also stated that the Chinese government is advancing a plan to build 10 million homes each year, while India has also reduced its iron ore exports, so iron ore prices tend to rise.

However, after the sharp fall in international iron ore prices in September last year, China’s slowdown in demand and the release of new mine production capacity in foreign countries are expected. Many industry players are expecting that iron ore will shift to the oversupply market, including long-term buyers. Look at the empty point of view. In fact, since December of last year, spot prices of 63.5% of iron ore in India have kept a slight fluctuation in the range of 140-150 US dollars / ton, even in January when the demand is low, the price is relatively stable. And such a price, for the operating conditions of domestic steel mills, is still unable to breathe under high-priced mines.

Moreover, the current international iron ore trading environment has also begun to be detrimental to importers such as Chinese steel mills, and raising the tariff of exporting countries undoubtedly increases the cost risk of imported iron ore in China. Since the end of last year, India, one of the major iron ore source countries in China, has just announced that the export tariff rate for iron ore will be raised from 20% to 30%. This year, the Vietnamese government will export iron ore and fine iron ore and pyrite from China. The original 30% increased to 40%, according to Vietnam Iron and Steel Association, said the move is to limit the original ore low-cost export phenomenon.

It is based on the above factors that Brazilian iron and steel giants such as Vale do not intend to further lower iron ore prices at the current level. Although due to the slow recovery of steel demand after the Spring Festival, the current import prices of iron ore are generally stable. However, from a long-term perspective, India and Vietnam increase the export tariffs on iron ore, either to increase the production cost of steel enterprises in China, and even lower profits. The loss of steel companies has been aggravated, either obstructing China’s iron ore multi-element import strategy and being more subject to the three major mines, making it difficult for China to compete for iron ore pricing power.

It is understood that China's iron ore spot trading platform, which was just launched in January this year, is not only suffering from the lack of international large-scale mines, but there are reports that Brazil's Vale is interested in joining. Due to the remote location of Brazil's Vale, which has a disadvantage in terms of freight costs compared with Australian miners, Vale has been hoping its 400,000-ton bulk carrier, which it belongs to, will be able to dock in a Chinese port and set up a distribution center in China. However, at the beginning of February, the Ministry of Transport issued the “Circular on Adjusting the Over-design Regulation of the Vessels' Vessels' Berthing” and canceled the “berthing power” of this mega-vessel of Vale, making its plans obstructed. The "chips" negotiating with Vale requires the wisdom of relevant domestic authorities.

Only through the participation and support of foreign mines, it is possible to obtain iron ore pricing space through the Chinese iron ore spot trading platform. Moreover, relevant departments must strengthen the authority of iron ore-related data and strive to obtain approval from foreign mines. This is also the basis for participating in the pricing of iron ore. All these require the relevant parties to increase their efforts.

Although the pricing power of the three major mines for iron ore is still the dominant low, China has made considerable efforts to participate in bargaining for iron ore in the past. However, we still have to use a modest strength to appeal, and the current demand for loose supply is slowing down. Under the circumstances, China is a good opportunity for China to gradually increase the pricing power for international iron ore pricing. China should make good use of current favorable opportunities and gradually increase its participation in bargaining pricing for iron ore.