Miners initiative to propose long-term contract mechanism

The Steel Association revealed today that some international iron ore suppliers have already proposed to establish a long-term cooperation mechanism. This seems to indicate that international iron ore prices are expected to return to the long-term mechanism model, although this model may only be monthly or quarterly pricing.

The Steel Association held a second-quarter information briefing this morning. Zhu Jimin, executive vice chairman of the Association of Steel Association of China, said that with the changes in supply and demand in the iron ore market, iron ore suppliers must establish a long-term cooperative relationship with win-win results. Some of the mines have already proposed to negotiate long-term cooperation mechanisms to form monthly and quarterly price mechanisms. We are also studying how to establish a stable supply and demand mechanism that can be mutually beneficial."

Iron ore suppliers take the initiative to establish a long-term contract mechanism

Zhu Jinmin did not disclose which of the three major mines first proposed the idea of ​​establishing a long-term contract. Previously, the long-standing mechanism for iron ore prices that had been used for more than 40 years began to collapse in 2008. Today, international iron ore prices are mainly based on spot prices, accompanied by some monthly and quarterly contracts.

From the perspective of the Steel Association, it seems that it has never given up its efforts to bring iron ore prices back to the Long-Term Association mechanism. Prior to this, the Steel Association also said that it is discussing the establishment of a long-term cooperation mechanism with iron ore suppliers. Today Zhu Jimin’s statement states that Rio Tinto, BHP Billiton and Vale's three iron ore suppliers have already responded positively.

According to data released by the Steel Association, the price of imported iron ore was 124.19 U.S. dollars at the beginning of this year, and it had risen to 158.54 U.S. dollars in mid-February. The price dropped slightly in March and began to rise again in April. Compared with the beginning of the year, the price of imported iron ore rose by more than 20-30 US dollars per ton, much higher than the steel price increase. At the same time, domestic iron ore prices have also increased, resulting in high production costs of steel.

In addition, on April 15th, the giant iron ore vessel owned by Vale quietly entered Lianyungang and was subjected to fierce battles with the China Shipowners Association. In this regard, does the Steel Association hope that the fleet of Vale enters Hong Kong? In response to NetEase’s questions, Zhu Jinmin stated that “all those who meet the norms are welcome to come in”.

Hebei Province is declaring a pilot province for steel structure adjustment

On April 2 this year, the Ministry of Industry and Information Technology released the first batch of 45 iron and steel companies that meet the "Code for Steel Industry". Surprisingly, none of the 45 steel companies is from Hebei Province, the largest steel producer in China. Followed by media reports, Hebei Province did not declare this time, all kinds of reasons are puzzling.

Zhu Jimin explained that he said that the list that meets the regulatory requirements is first reported by the enterprises, reviewed by the province, and then reported to the Ministry of Industry and Information Technology. However, the Hebei Province has been included in the trial provinces of the overall structure adjustment of the steel industry, and its determination is also very large, so it is being considered in an integrated manner. The next step will surely be to enter the list of qualified conditions."

According to the end of last year, Hebei Metallurgical Industry Association revealed that Hebei Province has applied for the national steel industry restructuring pilot qualification. At the same time, Hebei Province itself is also formulating a structural adjustment plan for the entire province's steel industry, and it will strive for approval this year.

Zhu Jimin disclosed that the first batch of 45 iron and steel enterprises had a total production capacity of 41%. It is expected that the second batch of “steel industry regulatory requirements” will be announced in August and September. Steels meeting the regulatory requirements will account for the industry at that time. More than 70% of the production capacity, "We will strive to do this in one and a half to two years, and eliminate backward production capacity in a planned way."