FEATURE: China’s iron ore amid greener steel - today
Over the past decade China’s steel industry including both steel production and raw materials supply has evolved to a degree no one back in 2009 – the year when iron ore pricing arrangements fell apart – would have believed possible. This was evident from comments made by delegates attending the 18th China International Steel & Raw materials Conference 2018 in late September in Dalian, Northeast China’s Liaoning province, also known as the annual iron ore event by the China Iron & Steel Association (CISA).
Among the obvious changes has been the reshuffling of market participants, mainly within the trading community. The crowd most days in the Dalian Shangri-La Hotel lobby during last month’s conference was once again as large and as voluble as in 2007 when the industry was in a boom, with traders, miners, and steel mill officials all busy mingling and rushing between back-to-back meetings. But this year, there were signs of a generational change. “Many old faces and companies from the old days are gone while new companies have emerged,” a Singapore-based iron ore trader observed to Mysteel on the sidelines of the welcome dinner on September 19.
Oil companies such as Mercuria and Gunvor have extended their trading activities to iron ore over the past decade while names such as Noble and Cargill are no longer basking in the glory they enjoyed ten years ago.
The conference proceedings at this year’s Dalian event had undergone a complete revamp too, with China’s core commodity exchange – Dalian Commodity Exchange heavily promoting its iron ore futures international trading and the eagerness of the Beijing Iron Ore Trading Centre Corp (COREX), China’s only iron ore e-trading platform to encourage iron ore miners to sell their ore via e-auctions in the spot market. Both organizations had begun offering iron ore-related services around 2012-2013.
At the CISA event too, all the four major iron ore index providers – Mysteel, Platts, Metal Bulletin (or Fastmarkets MB since October 1), and Argus – took turns on the stage to introduce their indices, each one a part of a general campaign aimed at persuading iron ore market participants to embrace indices in their iron ore trading activities, whether for long-term arrangements or spot deals.
The indices on offer also sit comfortably with CISA’s proposal for the iron ore market to adopt a basket of iron ore pricing indices, a plan that seems feasible, according to Liu Zhenjiang, CISA’s secretary general. “Many pricing reporting agencies and websites in China and outside have launched many iron ore pricing indices with different methodologies, and surely a basket of various indices will be fairer than a single index (to better represent the iron ore market),” he told delegates.
Over the past decade the most dramatic changes, however, have occurred
with the world’s top four iron ore miners – BHP, Vale, Rio Tinto and Fortescue
Metal Group – as each has been keen to share their business strategies. Yet the
common theme for each has been to explore every possible means to better serve
their customers in China, as all are aware of the country’s growing appetite
for supplies of ore with higher ferrous content and lower impurities rather
than greater volume. China is the world’s largest consumer of iron ore, its
mills gobbling around 70% of the world’s total seaborne iron ore trade in 2017.
This December for example, Fortescue Metals is committed to delivering its first West Pilbara Fines promising 60.1% ferrous content, far higher than its prevalent 57-59% grade products, while BHP has pledged to increase its output of lump ore to 100 million tonnes/year in the future from today’s 70 million t/y.
Roy Hill, a late comer to the iron ore mining fraternity in Western Australia, has also declared it is not eyeing any substantial expansion to capacity, but rather, is increasing its existing capacity to 60 million tonnes/year from the present 55 million t/y via higher recovery rates so as to stay competitive and relevant in the industry.
--Written by Hongmei Li, li.hongmei@mysteel.com
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