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MOFCOM positive about new iron ore pricing model
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10:46, August 18, 2009

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The iron ore price negotiation between China Iron and Steel Association (CISA) and Anglo-Australian Fortescue Metals Group Ltd. (FMG) proved a new pricing model of iron ore, and China appreciated the two sides' innovation, said Yao Jian, spokesman of the Ministry of Commerce (MOFCOM), on August 17.

The CISA reached an agreement with FMG for July-December imports of Fortescue's rocket fines (on an FOB basis) for 94 U.S. cents a drymetric tonne unit (dmtu). The agreed price represented a 35.02-percent price cut on 2008-2009 iron ore fines contracts and a 50.42-percent cut in the price of iron ore lumps.

Yao commented that the agreement reflected current iron ore demand-supply situation and the price was acceptable for both sides. The negotiation was the market behavior made by enterprises.

"Iron ore pricing should be beneficial to a fair international economic and trade order, should aim at a win-win situation between resource-exporting countries and resource consumers," he said.

As concentration ratio of China's steel industry is still low, possibility of market disorder still exists. Market disorder has also appeared in the development history of major western economies.

Yao believed that with the development of industry association and the enhancement of major enterprises' control over imports, iron ore trade order and the negotiation mechanism will be further improved.

By People's Daily Online



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