The three major mines used the opportunity to infiltrate Chinese steel companies to accept monthly pricing

China's mining giant, vice president of China Minmetals Group, Feng Guiquan, said on Monday that the three major mines hope to sign a monthly iron ore pricing agreement with China, but Minmetals hopes to stick to the long-term agreement price mechanism, as the collapse of the long association system will make the market even more Complex and exacerbate import risks.

At the 2010 China Import Forum, he said that there have been recent rumors that the mines have to change their quarterly pricing to monthly pricing. If that is the case, importing iron ore and buying and selling stocks will not be much different in some sense.

"Now the mine has shown its willingness to do so, depending on the outcome of the negotiations with China Steel Association," Feng Guiquan said to Reuters in the margin of the meeting. "But we hope to adhere to the long association mechanism and we can stick to it as long as possible, so it is convenient to arrange logistics and transport."

As the spot price of iron ore far exceeds the benchmark price of last year, Brazil's iron ore miner Vale VALE5. SAVALE. N, BHP Billiton BHP Australia. AXBLT. L and Rio Tinto RIO. AXRIO. L has said in April this year that it will abandon the annual pricing mechanism and shift to quarterly pricing.

Feng Guiquan pointed out that with the collapse of the Long-term Association System in 2010 and the formation of a quarterly pricing model based on the spot index, the financialization of iron ore will have a far-reaching impact. First, the market becomes more complex, the index may be manipulated, speculation is inevitable, and price fluctuations will become more and more frequent.

Secondly, business profitability becomes more difficult. Agreement price and spot price inversion will often occur. Imports will be lost. In addition, import risks will become larger. For importers, not only the purchase price cannot be determined, but sales may also be affected by price fall. Stakeholder default risk.

He also said that currently Minmetals has provided about 20 million tons of iron ore grades to the Chinese market each year, of which about 5-6 million tons are domestically produced. Minmetals' goal is to increase domestic iron ore supply to 10 million tons per year during the "12th Five-Year Plan" (2011-2015).

Talking about the progress of Minmetals' domestic mergers and reorganizations, he said, "There will definitely be, but it depends on market conditions."

Some analysts had previously stated that China's steel demand in 2011 will be further increased compared to this year's forecasted record of 613 million to 625 million tons, coupled with tight supply from India, iron ore prices are expected to be raised. Standard Chartered expects that iron ore prices will jump from the current slightly higher than 140 US dollars to 200 US dollars per ton in the next 12 months.