China Iron and Steel Association disclosed that its latest survey shows evident price manipulation on the iron market. Therefore, it suggests the implementation of a national reserve strategy.
According to the Association, China iron ore imports account for 75% of the world total iron ore trade through sea shipping. However, the global market of iron ore is monopolized by the top three foreign miners including Australia BHP Billiton and Rio Tinto and Brazil's Vale. They have pushed prices up which has dragged Chinese steelmakers’ profits down.
Mr Wu Xinchun vice secretary general of the Association pointed out that raw iron output was kept at a low level while iron ore imports have been rising since September last year. In the meantime, prices of rough steel made by China have been pushed higher and higher on the world market, which has buoyed iron ore prices since the end of last year. The price of iron ore is approaching a new record high of USD 200 per tonne on the spot market.
He said that "The average price of iron ore imports into China stood at about USD 128 per ton last year. However, it has risen to some USD 150 per ton in the first quarter of this year and currently the price index even has increased to USD 180 per ton. That means suppliers are attempting to affect steelmakers' sentiment on the market."
He believes it is absolutely necessary to establish a national strategy to build iron ore reserves. That strategy is aimed at achieving the balanced development of the industry, rather than higher yields.
Mr Wu insisted that a special government organization should be set up to formalize the policy framework of the national reserve system.
A report last year by the association and 14 major steelmakers to the State Council about the strategic influence of iron ore supply on the industrial security has received a positive response. As a result, the issue of iron ore supply has been on the agenda as part of the overall national resources strategy.