The Steel Association recently disclosed that several international iron ore suppliers have proposed the establishment of a long-term cooperation mechanism. This development suggests that global iron ore pricing may be shifting back toward a long-term model, though it could initially involve monthly or quarterly pricing arrangements.
During a recent second-quarter briefing, Zhu Jimin, executive vice chairman of the China Iron and Steel Association, emphasized the need for iron ore suppliers to build sustainable, win-win relationships with steel producers. Some mining companies have already approached the association to discuss the possibility of setting up long-term contracts with regular pricing cycles. The association is also exploring ways to create a stable supply-demand framework that benefits all parties involved.
While the long-standing price mechanism for iron ore, which had been in place for over 40 years, collapsed in 2008, current prices are largely based on spot trading, with some monthly and quarterly contracts still in use. The Steel Association has consistently pushed for a return to a more structured pricing system. Recently, it was reported that major suppliers such as Rio Tinto, BHP Billiton, and Vale have shown interest in establishing long-term agreements.
According to data from the Steel Association, the price of imported iron ore rose from $124.19 at the start of the year to $158.54 by mid-February. Although there was a slight dip in March, prices surged again in April. Compared to the beginning of the year, the price increase for imported iron ore exceeded $20–$30 per ton, far outpacing the rise in steel prices. Domestic iron ore prices have also climbed, leading to higher production costs for steelmakers.
In addition, a large iron ore vessel owned by Vale recently entered Lianyungang, sparking tensions with the China Shipowners Association. When asked if the Steel Association hopes Vale’s fleet will enter Hong Kong, Zhu Jimin responded, “We welcome all who meet the standards.â€
Meanwhile, Hebei Province, China’s largest steel producer, has declared itself a pilot province for structural adjustments in the steel industry. However, none of the 45 companies listed in the first batch of the "Steel Industry Code" were from Hebei. Zhu Jimin explained that companies must first apply, then be reviewed at the provincial level before being submitted to the Ministry of Industry and Information Technology. Despite not being included in the first round, Hebei has been designated as a trial province for industry restructuring and is actively working on its own adjustment plan.
As of the end of last year, the Hebei Metallurgical Industry Association confirmed that the province had applied for national pilot status for steel industry restructuring. It is also developing a comprehensive structural adjustment plan for its entire steel sector and aims to gain approval this year.
Zhu Jimin added that the first batch of 45 qualifying companies accounted for about 41% of total steel production. The second batch of companies meeting regulatory requirements is expected to be announced in August or September, covering more than 70% of industry capacity. “We aim to achieve this within one and a half to two years, eliminating outdated production capacity in an orderly manner,†he said.
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