China's Baoshan Iron & Steel is
currently buying iron ore based on quarterly prices calculated using
Platts' iron ore index IODBZ00-PLT, Deputy General Manager Chen Ying
said on Wednesday.
The Platts index is one of the three
major global iron ore indexes, with the two others being Metal Bulletin
Iron Ore Index .IO62-CNO=MB and The Steel Index <.IO62-CNI=SI.
Chen did not specify what proportion of
Baosteel's ore was being purchased in that manner, but said there were
currently "no negotiations" involved in pricing iron ore. She
was responding to queries in an online briefing.
Iron ore prices were traditionally based
on the "benchmark", an annual contract price negotiated by
major buyers and suppliers.
But the three dominant global miners --
Rio Tinto , BHP Billiton and Vale -- abandoned the decades-old system
last year after 2009 negotiations with top buyer China ended in
acrimonious stalemate.
While China's steel mills have already
come to terms with a more "market orientated" pricing system,
they continue to claim that the health of the sector is being harmed by
the "monopoly practices" of the big three global iron ore
suppliers.
"In the long term, only a more
balanced distribution of profits between the upstream and downstream
parts of the steel industrial chain can be of benefit to the overall
health of the sector," Chen said.
Baosteel's net profits fell 37 percent in
the first half of 2011, and the company's poor performance was partly
blamed on soaring raw material prices. The company said its gross profit
per tonne of steel amounted to 420 yuan ($66).
The company's general manager, Ma
Guoqiang, said at the same online briefing that profits were likely to
grow significantly next year as a result of higher demand.
However, iron ore prices were still
expected to remain high for the remainder of this year and next year,
and the market was likely to continue to favour miners for at least two
years, with supplies only set to improve after 2013 when a number of new
projects go into operation.
Ma said the sector was still facing risks
from the growing "financialisation" of iron ore prices.
Baosteel was still looking to resolve the
monopoly of supply by investing in overseas iron ore mines at a proper
time, he added.
Ma also expected little chance for steel
prices to rise or fall significantly in the fourth quarter due to still
high iron ore prices and the lack of remarkable growth in steel demand.
Source: Reuters