It is reported that while iron ore negotiation is still dragging on, China Iron & Steel Association recently suggested to the Chinese Ministry of Industry and Information Technology to totally scrap the spot iron ore trading mechanism.

In the meanwhile, some other experts advised to reduce the number of qualified iron ore importers to 5 to 10.

Mr Luo Bingsheng deputy secretary of CISA pointed out in the meeting that it is urgent than ever before to discipline the import iron ore market. He believes it is even necessary to totally abandon the spot iron ore trading.

Unlike the benchmark iron ore pricing system in Japan, Korea and Europe, China's iron ore market contains both spot trading and benchmark negotiation.

Currently, China totally has 112 qualified iron ore importers of which 70 are steel mills and the rest of 42 are traders. While those possess no import certificates can only turn to the spot market. And the long lasing fact of spot price is higher than that of benchmark price has undoubtedly created the speculations.

However, to totally abandon the spot iron ore system remains unrealistic, as believed many insiders. Mr Lin Xinchuang Vice Dean & Chief Engineer China Mercury Industry Planning Institute said to accelerate the speed of industry consolidation and therefore upgrade the industry's concentration remained the key to tackle the contradiction. He suggested MIIT to reduced the number of iron ore importers to 5 to 10 and believe only in this way can greatly support the industry's consolidation.

Mr Xinchuang said that “We believe the reduction of iron ore importer comes to the major concern of how to properly defend the benefits of small-and-medium size steel mills. The open and apparent auction could be a workable way to decide who will finally get the certificate. More importantly, the final qualified importers should strictly carried out the market rules and resell the materials to buyers at a reasonable price.”

As we understand, MIIT has disclosed to hammer out the detailed industry consolidation guidelines earlier than scheduled. Rumors also said that CISA and other related departments are starting the work of reducing iron ore importers.

(Sourced from MySteel.net)
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