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China compiled price index for iron ore used for first time

China’s compiled price-index for iron ore has been used for the first time by a major iron ore producer. The index is one of a series of indices called My steel, tracking a range of commodities in the regional market.

CCTV news looks into what’s next for the index and China’s influence in global commodity prices.

BHP Billiton, the world’s largest iron ore company, has made a procurement in terms of China’s iron ore index for the first time. This is the first step for China’s iron ore pricing. That’s the word from the China Iron and Steel Association on Sunday.

“BHP priced two shipments of iron ore with My Steel’s 62 percent Australia ore fine index through private negotiations in September,” said Wang Yingsheng, vice chairman, China Iron & Steel Association.

Besides, other mining companies are also in talks with My Steel, discussing the possibility of adopting the index.

One key accelerator behind the trend is the fact that China is the world’s largest iron ore importer.

“Major iron ore producers have to take China’s demand into consideration. Now the demand is weak, and the production cost of iron ore is rising. So there are more downsides for iron ore,” said Li Xinchuang, director, Metallurgy Planning Institute.
The large iron ore companies like BHP Billiton, have traditionally only used the U-S Platts index-based pricing system. But this system has been criticized by some, as they believe it cannot completely reflect the reality of global supply and demand.

“Our index is closely tracking the market movements from the world’s biggest commodity buyer’s perspective. The iron ore index will be a textbook for other commodities to forge pricing indices. By doing so, China will beef up its say on the global commodity market,” said Zheng Yunchun, Dep. Director, China Steel Dev’t & Research Institute.

According to this index, the price of imported iron ore to China has been rising for the last 10 years, except during the 2008 global financial crisis.
Source: CCTV