It is reported that the skyrocketing iron ore imports have finally forced China Iron & Steel Association who takes the lead in this year's iron ore price negotiations and coordinates total iron ore imports, to unite with other departments in rectifying the disorderly iron ore import market.
China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters responsible for the coordination of domestic iron ore traders is to convene a board meeting this week discussing to raise the threshold for qualified ore importers to cut the number of intermediate dealers. In the mean time, CCCMC will strengthen the monitoring of iron ore import tonnages and where it flows to in order to check the speculative hoarding and trading, a move that shows CCCMC firm decision in iron ore talks with the Top Three.
Customs data shows China imported 241.89 million tonnes of iron ore in total in the first five months up by 25.9%YoY from a year ago. And the blindly iron ore hoarding up by some traders has inflated iron ore market demand putting domestic steel mills at a disadvantage in ore talks.
To reverse the situation, CISA released a statement on June 9th rebuking the current speculating iron ore trading and forcing the newly established Rizhao International Iron Ore Trading Center to give up its spot ore trading service. Meanwhile, the association and the Ministry of Commerce and CCCMC would send teams to check up on the iron ore imports piling up at the seaports soon. The association warned that "Traders involved in speculative iron ore trading would get their import license revoked."
In fact, a self discipline pact has already been approved at the year start which asked all players to preserve a standard iron ore import market order by implementing self discipline. The pact also requires steel mills to import iron ore no more than they need and large mills would act as import agents for mills without licenses, or which only import small tonnages at a maximum 3% fee on top of the FOB price to CISA member mills and a maximum 5% fee for non member mills.
However, analysts reckon the agent system would meet challenges in operation in light of the fragmented Chinese steel sector. They said "The most pressing issue now is how to integrate the demand from thousands of medium and small sized steel mills and a measure must be worked out as soon as possible to balance the interest between bigger and smaller mills."