After a trial period lasting more than one month, China officially launched its iron ore price index Tuesday, a move believed to better reflect the domestic market and give the country a greater say in global pricing.
The China Iron Ore Prices Index is compiled by the China Iron and Steel Association (CISA), the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters, and the Metallurgical Mines' Association of China (MMAC), the CISA said.
The index, which will be released on a weekly basis starting in October, is made up of two sub-indices: the domestically-produced iron ore price index and the iron ore import price index.
The CISA said both sub-indices take iron ore prices in April 1994 as the base.
The domestic iron ore price index is based on the prices of iron ore concentrates in 14 provinces, autonomous regions and municipalities as well as in 32 mining areas. The import price index is collected based on data from eight ports.
Currently, the world's major miners use foreign companies' iron ore indices as a reference, including the Steel Index, the Metal Bulletin Iron Ore Index and the Platts Iron Ore Index.
Last year, the three global mining giants, including Rio Tinto, Vale and BHP Billiton, announced the end of the long-term iron ore contract pricing mechanism and started adjusting iron ore prices quarterly or monthly based on price indices. This made iron ore price indices increasingly important and pushed China to release its own data.
The launch of the China Iron Ore Prices Index will more accurately reflect price changes and provide better information services for steel companies and trading enterprises, experts said.
China is the world's leading consumer and producer of steel. Its steel output accounted for 44.3 percent of the world's total last year, up from 13.5 percent in 1996, according to data from the CISA.
Chinese demand for iron ore jumped along with its rising steel production. The country imported 618 million metric tons of iron ore last year and its foreign iron ore dependency stood as high as 62.5 percent, said Zhu Jimin, president of the CISA.
The country's increased dependency on foreign iron ore has kept prices of the key industrial ingredient close to historic highs this year, which has become the greatest factor affecting the profitability of the country's steel industry, said Zhou Wangjun, deputy chief of the Price Department of the National Development and Reform Commission.
During the first eight months of this year, China's imports of iron ore rose 10.6 percent year-on-year to 448 million metric tons. The average landed prices of iron ore soared by 37.5 percent to reach 164.36 U.S. dollars per metric ton, meaning additional costs of 130 billion yuan (20.31 billion U.S. dollars) for the Chinese steel industry.
Profit margins of large- and medium-sized steel companies hit just 3.08 percent during the first seven months of the year, down 0.1 percentage point year-on-year and far below the 6.11 percent profit margin seen in the country's major industrial enterprises, Zhu said.
"This reflects cost pressures mounting on Chinese steel companies," he added.
The financialization of the iron ore market has been more visible in recent years. The era when mills and miners negotiated annual contracts for iron ore has passed. Miners now prefer index pricing and futures pricing mechanisms, noted Shao Anlin,
The China Iron Ore Prices Index is compiled by the China Iron and Steel Association (CISA), the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters, and the Metallurgical Mines' Association of China (MMAC), the CISA said.
The index, which will be released on a weekly basis starting in October, is made up of two sub-indices: the domestically-produced iron ore price index and the iron ore import price index.
The CISA said both sub-indices take iron ore prices in April 1994 as the base.
The domestic iron ore price index is based on the prices of iron ore concentrates in 14 provinces, autonomous regions and municipalities as well as in 32 mining areas. The import price index is collected based on data from eight ports.
Currently, the world's major miners use foreign companies' iron ore indices as a reference, including the Steel Index, the Metal Bulletin Iron Ore Index and the Platts Iron Ore Index.
Last year, the three global mining giants, including Rio Tinto, Vale and BHP Billiton, announced the end of the long-term iron ore contract pricing mechanism and started adjusting iron ore prices quarterly or monthly based on price indices. This made iron ore price indices increasingly important and pushed China to release its own data.
The launch of the China Iron Ore Prices Index will more accurately reflect price changes and provide better information services for steel companies and trading enterprises, experts said.
China is the world's leading consumer and producer of steel. Its steel output accounted for 44.3 percent of the world's total last year, up from 13.5 percent in 1996, according to data from the CISA.
Chinese demand for iron ore jumped along with its rising steel production. The country imported 618 million metric tons of iron ore last year and its foreign iron ore dependency stood as high as 62.5 percent, said Zhu Jimin, president of the CISA.
The country's increased dependency on foreign iron ore has kept prices of the key industrial ingredient close to historic highs this year, which has become the greatest factor affecting the profitability of the country's steel industry, said Zhou Wangjun, deputy chief of the Price Department of the National Development and Reform Commission.
During the first eight months of this year, China's imports of iron ore rose 10.6 percent year-on-year to 448 million metric tons. The average landed prices of iron ore soared by 37.5 percent to reach 164.36 U.S. dollars per metric ton, meaning additional costs of 130 billion yuan (20.31 billion U.S. dollars) for the Chinese steel industry.
Profit margins of large- and medium-sized steel companies hit just 3.08 percent during the first seven months of the year, down 0.1 percentage point year-on-year and far below the 6.11 percent profit margin seen in the country's major industrial enterprises, Zhu said.
"This reflects cost pressures mounting on Chinese steel companies," he added.
The financialization of the iron ore market has been more visible in recent years. The era when mills and miners negotiated annual contracts for iron ore has passed. Miners now prefer index pricing and futures pricing mechanisms, noted Shao Anlin,
