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BHP to join China's iron ore trading platform

Updated: 2012-04-19 11:01

By Du Juan (China Daily)

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BHP Billiton Ltd, the world's largest mining company and the third-biggest iron ore miner, will join China's first spot iron ore trading platform on Thursday, said Wang Chunsheng, deputy secretary of the China Iron & Steel Association.

So far, top foreign miners including Rio Tinto Plc, Vale SA and Fortescue Metals Group have joined the platform, which will help China gain more power over iron ore pricing and provide more transparency in the physical market.

Brazilian miner Vale joined the platform on Tuesday, two days before BHP.

The China Beijing International Mining Exchange launched the online platform together with CISA and the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters in January, aiming to create a fair and transparent iron ore trading platform for domestic and foreign companies.

"The platform will go online in May," said Wang Chunsheng, deputy secretary of CISA.

"We finished all the testing and technological adjustment in March.

Major steel companies have installed the software of the platform and a test run started on April 5."

The platform has been operating well so far, he said.

Meanwhile, the exchange is also publishing a new iron ore price index, an attempt to better reflect supply and demand as well as reduce price volatility.

The index will be published once or twice a week with trading prices instead of inquiry prices, said Zhang Changfu, vice-chairman of CISA, who added that this would make it more reliable.

"We ensure the truthfulness of the prices we collected, which will be more valuable for both the sellers and buyers," he said. "As the biggest iron ore importer and consumer in the world, China needs to have its own price index. It's our responsibility."

CISA Vice-Chairman Wang Xiaoqi said monopoly practices and price manipulation have exerted a big impact on iron ore prices, which hurt many Chinese companies.

Iron ore prices fell a little recently, but this will not last for long, said Yang Shilin, deputy Party secretary of Shagang Steel, the largest privately owned steel company in Zhangjiagang, Jiangsu province.

He said that the trading platform will not help domestic companies much as long as China has such a huge production capacity.

"The Australian government will impose a resources tax, which will eventually lead to the higher iron ore prices," he said.

China's major steel companies - including Baosteel Group Corp, Hebei Iron & Steel Group Co Ltd, Wuhan Iron and Steel Group Corp, Shougang Group, Angang Steel Co and China National Minerals Co Ltd, a subsidiary of China Minerals Corp -have all joined the new trading platform.

Although Chinese demand for iron ore is still increasing, not all of it is effective demand, said Wu Rongqing, chief engineer of the China Mining Association.

In 2011, domestic iron ore production increased by 283 million tons, or 27.2 percent. However, iron ore imports reached 686 million tons in 2011, up 68 percent.