The hottest new mechanism of participating in lead

2022-08-12
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Participating in the new mechanism of leading pricing, the "agency system" of iron ore can be suspended

participating in the new mechanism of leading pricing, the "agency system" of iron ore can be suspended

China Construction machinery information

Guide: Luo Bingsheng, a specially invited analyst of China Iron and Steel Industry Association, said at the 2011 metallurgical gold products conference held recently that he would consider comprehensively implementing the agency system of imported iron ore. This statement once again pushed the pricing of imported iron ore into the line of sight of the industry. The so-called imported iron ore agency system refers to the iron ore importer

Luo Bingsheng, a specially invited analyst of China Iron and Steel Industry Association, said at the 2011 metallurgical gold products conference recently that he would consider comprehensively implementing the imported iron ore agency system. This statement once again pushed the pricing of imported iron ore into the line of sight. In fact, it is not an easy business. The so-called import iron ore agency system refers to the system that iron ore importers (agents) act as agents for steel mills to import iron ore according to the demand of the end demander of iron ore (i.e. steel mills). 80% of the middle-end market of agents is also occupied by foreign manufacturers. They can't earn the price difference of iron ore imports, but can only charge a certain agency fee. The starting point of CISA's "agency system" is to rectify the chaotic order of the domestic imported iron ore market, mainly to solve the two problems of "double price of imported iron ore" and "reasonable control of port iron ore inventory"

the previous automatic licensing system and qualification management are considered to be the root cause of the prevalence of scalping and speculation in the imported iron ore market, which makes it difficult for China's iron ore demand to form a "consistent external" force. The agency system of imported iron ore is different from the two. If the agency system is implemented, because the iron ore trade cannot be carried out among agents, steel mills and between steel mills and agents, the behaviors of "ore dumping" and "ore speculation" will be eliminated, which is conducive to reflecting the real demand of domestic iron ore, so as to achieve the purpose of rectifying the imported iron ore market

"agency system" is the product of the lack of pricing power

CISA fully promotes the agency system of imported iron ore. on the surface, it is to rectify the chaotic order of the imported iron ore market. In essence, it is to compete for the right to speak in the global iron ore price system, so that the iron ore price has a reasonable "China unified price", and this price should reflect the characteristics of "large quantity and excellent price". In the past few years, we have either accepted the initial price from Japan, South Korea or Europe, or passively accepted the pricing method of the three major mines, which does not reflect the characteristics of "large volume and excellent price". At the same time, most of the electricity channels composed of milli in quarterly pricing, monthly pricing and indexed pricing have no voice. Behind the imported iron ore agency system is the competition for the right to speak about iron ore prices, which reflects the "sorrow" of the lack of iron ore pricing power

to solve the current chaotic source of iron ore market, it is not whether to implement the agency system at all, but to establish a pricing mechanism acceptable to both the iron ore supplier and the demander. What the domestic steel industry needs to do is to actively participate in and even lead the formation of the new iron ore pricing mechanism, rather than nostalgia for the non-existent long-term association era and trying to recover or recover

the financialization trend of iron ore pricing is irreversible

in the era of long-term association of iron ore prices, prices are basically formed through negotiations between mines and steel mills, reflecting the consensus of the industry. However, in 2010, with the disappearance of the long-term association model that has been maintained for 40 years after the three major mines forcibly promoted quarterly pricing, indexed pricing came into being. After the implementation of index pricing, the determination of iron ore price is no longer just a matter between mines and steel mills. In addition to mines and steel mills, there are also a large number of financial institutions and investment institutions, and even many speculators with unknown origins

in fact, we should not be surprised about these. Looking at the pricing of international bulk commodities, we have basically experienced the process of long-term agreement pricing, spot pricing and futures pricing. For example, in the early stage, crude oil prices were almost long-term association prices, and there was a spot adjustment market after overproduction. With the increase of trading volume in the spot market, the influence of spot price is becoming greater and greater, and spot pricing begins to replace long-term association price. After the size of the spot market became larger, the price fluctuations became more and more frequent, and the business risks increased. All parties involved in the market began to look for ways to avoid risks, so there was futures trading. As the futures price can reflect the information of all market participants and better reflect the supply and demand pattern of the whole market, it is naturally accepted by market participants, thus becoming the pricing benchmark of spot goods. After futures became the main pricing method, commodity pricing also completed the process of financialization

we dare not assert that iron ore pricing will follow the path of crude oil pricing, but the current indexed pricing and its supporting swap transactions are actually financializing iron ore pricing. Once the climate of iron ore futures is formed, it will replicate the process of crude oil pricing. In the future, no matter how the iron ore pricing mechanism appears, it will be difficult to get rid of the return path of gold melting

China has great potential in the financialization of iron ore pricing

the agent system of imported iron ore may solve the two major problems of "double price of imported iron ore" and "reasonable control of port iron ore inventory", but it is unknown whether the price of imported iron ore can further reflect the "China unified price" of "large quantity and high price". In my opinion, the measures taken by CISA to promote the agency system of imported iron ore can be postponed, and it is urgent to actively participate in or even dominate the new iron ore pricing mechanism. In fact, China's iron and steel industry has great potential in the financialization of iron ore pricing. There are three feasible ways:

first, compile an iron ore price index that reflects China's supply and demand and is accepted by all parties. At present, there are three internationally influential iron ore price indexes, namely, TSI index of SBB (parent company of steel index), mbio index of Metal Bulletin and Platts index. China's iron and steel industry should encourage the development of domestic professional iron and steel information institutions and assist them in compiling iron ore price indexes that better reflect China's iron ore supply and demand

with a good index, China's steel industry can jointly develop indexed products with domestic financial institutions, such as iron ore swaps. It is gratifying that China has paid unprecedented attention to the research on the financialization of iron ore. It is understood that the Ministry of industry and information technology is conducting research on iron ore negotiations and the financialization of the steel market. A relevant person from the Ministry of industry and information technology also said that foreign countries have taken steps in the integration of industry and finance. China's industry and finance also need to find the intersection of the two and integrate their development in order to promote the financialization of China's steel market and further gain the price voice in the international raw material market

second, accumulate the maximum experimental force: 1000KN greatly promotes the development of iron ore futures trading in China. Due to major difficulties in standardization and experience of iron ore, it is still difficult to launch relevant futures varieties in domestic exchanges in the short term, but this is a direction worthy of efforts

third, promote the pricing of iron ore based on domestic steel futures as soon as possible. In the pricing of non-ferrous metals such as copper ore, futures prices are generally used to price copper concentrate after deducting the costs of primary refining and refining (tc/rc). The pricing of iron ore can be based on this model. In this way, iron ore can be priced as long as the steel mill and the mine negotiate the "processing fee" every year. This is the most feasible path at present, but the premise must be that the domestic steel futures price can be accepted by all parties involved in the market. This requires domestic steel mills to actively participate in steel futures trading, so that the steel futures price can reflect the information of all market participants, and reflect the consensus of the market, so as to become an authoritative price recognized by everyone

considering that there are many participants in China's steel futures market and the market is becoming more and more mature, steel mills can participate in steel futures trading as early as possible. The more steel mills participate, the more influential the domestic steel futures price is, and the more feasible it is for iron ore to price with steel futures. Once a mature iron ore pricing mechanism is formed, the imported iron ore agency system does not need to be implemented. We hope that China's steel industry and financial industry can participate in the formulation or lead the new iron ore pricing mechanism as soon as possible

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