Chinese steelmakers should reduce the amount of iron ore they buy through long-term contracts in favor of purchasing from the spot market, through trading platforms, the China Iron & Steel Association said Wednesday.
"Mills should appropriately reduce term contractual volumes and increase the amount of iron ore they buy from spot trading platforms," said Wang Xiaoqi, vice chairman of the association at an industry conference in Qingdao, China.
Wang called upon mills, mining companies and traders to participate actively in spot iron ore trading platforms to "boost fairness and the formation of a transparent pricing mechanism."
"If about 400 million-500 million mt of iron ore were traded on platforms annually, we'd able to generate a price index for use as the basis of contractual negotiations with miners," Wang said.
Spot tenders that miners now use to sell ore are not transparent, and the use of trading platforms should be used to rectify that, Wang said, adding that trading companies should also participate actively in the platforms.
CISA backs the China Beijing International Mining Exchange, or CBMX, which, with globalORE, are two platforms on which some spot trading activity takes place.
CBMX was launched in a bid to wrestle back pricing power into the hands of the Chinese, the world's biggest iron ore buyers, in an industry where most-used indexes for the steelmaking ingredient are published by foreign companies.
Wang also said steelmakers that buy large volumes of ore should be given preferential terms by their suppliers, in what he called his vision of a "new order" of cooperation between suppliers and end-users of iron ore.
