China Iron and Steel Association’s Iron Ore War

Since the international iron ore price ushered in the era of financialization, the negotiation model based on index pricing has gradually replaced the previous Long-term Association mechanism. On September 20, the China Iron and Steel Association held a press conference for the official launch of the "China Iron Ore Price Index," which also announced that the Chinese steel industry has renewed its struggle for iron ore right to speak.

The launch of the index has also been interpreted by the industry as a new battle model designed by the new leadership of the China Steel Association for the Chinese steel industry. Prior to this, the Chinese Steel Association, which was described as a war-torn and defeated match, completed the change at the beginning of this year. The departure of Luo Bingsheng and Shan Shanghua did not completely lose confidence in CISA and a new war began.

However, an industry source stated that although the semi-official status of CISA is more reliable, it represents a Chinese steel company, and the objective and fairness will be questioned by the three major iron ore giants. In addition, there have been a number of institutions in the country that have issued iron ore price indices before, but none have had a major impact.

Challenging the International Steel Association’s Three Major Indices in Pursuing Data Authority

September 20 should be the first time that China Steel Association held a press conference at the Diaoyutai Museum. So whether it is the name of the conference or the venue, it reminds you that this industry-wide price index wants to have enough authority. Not only the China Iron and Steel Association, including the Minmetals Chemicals Import and Export Chamber of Commerce and the China Metallurgical and Mining Enterprises Association also participated in the preparation of the index. On the government side, there are support from the National Development and Reform Commission, the Ministry of Industry and Information Technology and the Ministry of Commerce.

According to the arrangement, the iron ore price index of the China Iron and Steel Association consists of two sub-indexes, the domestic iron ore price index and the imported iron ore price index, all based on the price in April 1994 (100 points). . Since August, the index has been trial run for eight issues, and its data sources cover more than 90% of domestic production and imports. From October on, the index will be released publicly on a weekly basis.

Vice Chairman and Secretary-General of the China Iron and Steel Association Zhang Changfu told NetEase that the index had only been tested internally before, so domestic steel companies have not yet seen specific figures, but the principle of preparation of the index is to follow a more scientific and more reasonable approach. And more real, "I believe it will give an important reference to the supply and demand sides and play their due role."

There are already a number of institutions in China that publish their own calculated iron ore price indices, including Xinhua News Agency, My Steel and China United Iron and Steel Network, and Platts-owned Platts in the international community. Index and TSI index, as well as the MBIO index of the Metals. Zhang Changfu stated that the China Steel Association's index has not communicated with foreign counterparts during the preparation process, so they do not mind their reactions.

After the meeting, Zhang Changfu told the media frankly, "The China Iron and Steel Association iron ore price index is the pursuit of authority." Of course, whether self-deprecating or not, a Deputy Secretary-General of the China Iron and Steel Association privately admits that whether or not the new iron ore price index can ultimately represent “China” is influenced by many objective factors.

Currently, Rio Tinto, BHP Billiton and Vale's three major iron ore giants use the Platts Index as their pricing reference, and the China Steel Association’s version index will not be accepted by the Chinese steel companies and the three foreign iron ore giants. Zhang Changfu It has been emphasized many times before that the more considerations of the CISA are to increase the authority and authenticity of the index and to objectively reflect the needs of the Chinese iron ore market. As to whether it is accepted by the foreign party, it can be said that it “remembers to respect the position”.

In the era of iron ore financialization, China again sought the right to speak

In the past, the China Steel Association had been avoiding the so-called struggle for iron ore right to speak in public. However, after the press conference that day, Zhu Jimin, president of the China Steel Association, who rarely appeared on the occasion of the China Iron and Steel Association also publicly stated that he believes that the newly launched Chinese iron ore price index will gain the right to speak in the international arena. This is due to the Chinese iron ore. The share of consumption is too large. On the other hand, the data collection sample of the China Steel Association's edition index is wide and reliable.

Zhou Wangjun, deputy director of the price division of the National Development and Reform Commission, expressed directly on behalf of the National Development and Reform Commission and hoped that the China Steel Association’s version of the price index could “get out of China and go to the world as soon as possible to make its due contribution to scramble for discourse power,” he said. “China Iron Ore The introduction of the "Stone Price Index" is conducive to breaking the monopoly market pattern of the Big Three and is of strategic significance to the Chinese steel industry.

According to the data of China Iron and Steel Association, China now produces about half of the world's crude steel annually. The consumption of imported iron ore accounts for about 63% of domestic consumption. In the first eight months of this year, China has cumulatively imported 448 million tons of iron ore. Ton. On the other hand, iron ore prices have continued to soar in recent years, which has severely curtailed the production profits of the Chinese steel industry. In the first half of this year alone, the import of iron ore increased the amount of RMB 130 billion.

The grim situation requires the Chinese steel industry to try to change the current predicament, but since joining the international iron ore price negotiations since 2003, the Chinese steel industry has been subject to the three major iron ore giants in negotiations and even triggered the Rio Tinto employees. Vicious cases arrested by the Chinese police. Since then, the 2009 Long-term Association mechanism has collapsed. Since last year, quarterly pricing and monthly pricing models based on index pricing have been accepted by supply and demand sides.

At this time, the Chinese steel industry, which had just been forced to abandon the long association mechanism, had to temporarily cram in to study the iron ore price index. However, an analyst who asked for anonymity told NetEase that it is not optimistic about the prospects of the China Steel Association's version of the index. "There will be a certain degree of difficulty." The analyst pointed out that there have been several institutions in the country that have issued iron ore price indices, but none have had a big impact.

The analyst pointed out that what is more important is the semi-official status of China Steel Association. Although the data is more reliable, it represents a Chinese steel company. Its objective and fairness will be questioned by the three major iron ore giants. Previously, it was already reported that it was once full of controversy that China Steel Association had made the index itself or handed it to a third party.

The new leadership team is still defeated by the China Steel Association

The status of China Steel Association is once again questioned. Prior to the negotiations on behalf of the Chinese steel industry and the three major iron ore giants, the Chinese Steel Association also faced the ambiguity of identity. The semi-official guild, which was retired at the time of institutional reforms in 1998, has been part of the industry management function for many years.

China Steel Association’s internal experts once stated that Sinosteel’s collaboration as a semi-government organization is questionable at the beginning of the organization’s negotiations. It is quite embarrassing. As an industry association, if it represents the interests of steel companies, there are still many small and medium-sized steel mills and private enterprises. The steel mills are outside the system and represent the government to rectify the industry's illness. It also lacks the corresponding power and execution power. This situation cannot be solved by itself.

At the beginning of 2009, the Chinese government announced plans for the revitalization of the steel industry, the first of which was the explicit unification of the iron and steel enterprises of the China Iron and Steel Association to organize foreign negotiations. That is, from the beginning of this year, the positions of the Chinese negotiators suddenly became extremely strong. The Secretary-General of the China Iron and Steel Association, Shan Shanghua, frequently chanted in the media about the three major mines. However, the final result still did not meet the requirements of the China Iron and Steel Association. At that time there was an accusatory voice that the CISA had only missed the opportunity to reach an agreement with the three major mines in order to express itself.

At the time, the Chinese steel industry, represented by the executive vice president of the China Iron and Steel Association, Luo Bingsheng and Secretary-general Shan Shanghua, was suffering internally and externally. The overcapacity and trade order chaos counterbalanced most of the efforts of the China Steel Association. Including Rio Tinto's staff arrests caused by the civil steel industry in China, it can be said that the iron ore dilemma has exceeded the scope of the economic community, and later in 2010 iron ore prices have risen sharply, China Steel Association has been difficult to control the situation.

"Too tired," said Shan Shanghua in the media in February of this year. At that time, the news of both Luo Bingsheng and Shan Shanghua both resigning had just announced that the successors were Wang Xiaoqi and Zhang Changfu. Accompanied by the end of the long-standing mechanism for iron ore price, there were comments that Luo Dan's retirement represented the end of an era of iron ore price negotiations.

The new leadership team did not have much movement in the iron ore field. The release of the iron ore price index can be seen as a new battle for the future of the steel industry. Just do not know how long the leadership of the China Iron and Steel Association can persist in the situation that iron ore supply is still monopolized by the three major mines. Xu Zhongbo, a steel expert, told Netease that the iron ore price index should be maintained by the China Iron and Steel Association, and it will eventually wait until that day, when the iron ore supply exceeds demand and becomes a buyer's market.