Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

China Iron and Steel Association (CISA) has questioned leading miners like BHP and Rio Tinto about ‘unreasonable’ iron ore prices hitting a seven-year high at $160/mt cfr China recently. The association wants to check whether the miners have artificially restricted supplies to raise prices. CISA also wants to study and establish a new pricing mechanism to avoid such volatility and its impact on end-users.  


Amid squeezing profit margins of Chinese mills on high raw material prices CISA is working to review the pricing mechanism for the steelmaking ingredient. Anglo-Australian iron ore miner, Rio Tinto is likely to work with CISA to fix this and keep the iron ore market open and transparent. It will investigate if the spike in prices is just driven by the speculations.  


On Wednesday, the Dalian Commodity Exchange (DCE) jumped to its highest-ever close to CNY1,008/mt ($154/mt) following recovering futures. In Q4 2020, Dalian iron ore prices have increased by almost 34-35pc that has alarmed many steel producers. Prices almost doubled to $160/mt cfr China for Fe content at 62pc since early 2020.  


Rio Tinto has received a number of orders despite high prices and has conducted transactions, claimed a statement from the association. CISA believes that such a sharp hike in prices is non-conducive for the long-term healthy development of upstream and downstream industry in the country.  


Rio Tinto has also initiated iron ore sales to ports in China via a WeChat app, setting an example of fully paperless end-to-end transactions using blockchain technology.


China imports more than 80pc of its iron ore from Australia. About 660mn mt or 63pc of total imports were from Australia, mainly via Rio Tinto, BHP and Fortescue Metals Group. Trade tensions with Australia also spurred prices while many traders have been rushing into asset markets in search of better returns amid a low-interest environment, creating a necessity to introduce trading caps.  

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