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Chinese Firms Must Adapt To New Iron Ore Pricing System -Executive

Issued at 2010-09-07



BEIJING -(Dow Jones)- China's industry participants and financial institutions should study building up a domestic iron ore futures market as part of the effort to adapt to the new quarterly pricing mechanism for the raw material, Feng Guiquan, vice president of China Minmetals Corp., said Monday.

The world's three biggest iron ore miners Rio Tinto Ltd. (RTP), BHP Billiton Ltd. (BHP) and Brazil's Vale S.A. (VALE) have abandoned the old annual iron ore pricing system and started using more flexible index-based pricing systems from the second quarter.

In China, while no official changes on the pricing system have been announced, the local steel industry has widely started using the Platts Index-based system, which sets quarterly iron ore prices based on the average iron ore prices of the previous quarter.

China is the world's largest importer of iron ore.

Feng said while the index pricing system may create more room for manipulation by global mining giants and add uncertainties on China's iron ore imports, Chinese firms need to adapt to the trend and actively participate in setting new pricing rules.

He also said steelmakers may find it harder to make profit from importing iron ore because the new system is likely to cause spot prices to fall below index prices more often than before.

-Yajun Zhang contributed to this article; Dow Jones Newswires; (86 10) 8400-7712; yajun.zhang@dowjones.com


Source: ADVFN



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