At the “2013 China Iron Ore Conference†held in late February, Li Xinxing, executive vice chairman of the China Iron and Steel Association, highlighted that the three major mining giants had been manipulating iron ore prices by controlling shipments and frequently conducting spot auctions. Currently, about two-thirds of the world’s 1 billion tons of seaborne iron ore is sold to China, giving the country significant influence over global pricing.
There has been speculation about the potential release of import license qualifications for iron ore. The China Steel Association is expected to announce a list of companies eligible for import licenses in the first half of the year. However, an insider from the Development Research Department at the North Mining Institute told reporters that, without official documentation, they are unable to comment on whether these changes will be implemented.
During a press conference held by the Ministry of Industry and Information Technology on April 23, spokesperson Xiao Chunquan confirmed that he was not aware of any news suggesting that iron ore import companies must go through the North Mine. Analyst Wan Shan from Treasure Island, a commodity trading platform, noted that after 2005, China canceled import qualifications for over 400 companies in an effort to regulate the market and prevent price manipulation through "reverse mining." Despite this, the impact has been minimal over the past eight years.
The rumor of relaxed import qualifications has sparked excitement in the market. Jiang Jiang, a trade representative from Hebei Tangshan, expressed hope that import licenses would be liberalized. In 2011, his company was denied import qualifications, forcing them to work through an agent in Tianjin, which led to higher costs.
Jiang believes that easing import restrictions could encourage more steel companies and traders to source iron ore from multiple channels, helping stabilize domestic prices. According to data from the Ministry of Commerce, as of 2011, there were 105 qualified companies, with 65 being steel firms and 40 being traders. These companies are subject to re-evaluation every two years, with the next review expected in 2013.
Despite the lack of official confirmation, Zhang Changfu, deputy chairman of the China Iron and Steel Association, mentioned that efforts are underway to clean up companies with import licenses. However, no official stance has been taken on whether the qualifications will be tightened or relaxed.
Wan Shan pointed out that 70% of iron ore used by Chinese steel mills comes from foreign sources, which are more accustomed to free-market mechanisms. He suggested that the government should reduce its intervention and allow traders to operate freely as long as they comply with the law.
In 2012, the North Iron Ore Mine accounted for less than 1% of China’s total iron ore imports. Although the North Korea Exchange has not commented on the potential implementation of new policies, it is clear that if the news is true, the most likely beneficiary is the newly established platform.
On May 8, the North Mine celebrated its one-year anniversary, but its trading volume fell far short of initial expectations. By the end of 2012, the platform had processed only 7 million tons out of 740 million imported into China—less than 1% of the total.
At the 2013 China Steel Planning Forum, Luo Tiejun, deputy director of the Ministry of Industry and Information Technology, noted that the North Mine’s low transaction volume made it difficult to influence pricing. For the platform to gain pricing power, it would need to reach 20% of the total import volume.
A vice president of the Beijing Mining Rights Exchange revealed that while many large companies have joined the North Mine, actual transactions remain limited, with small and medium-sized enterprises dominating the activity. The slow adoption of electronic trading platforms is partly due to the continued reliance on traditional methods by traders and steel mills.
Luo also attributed the low trading volume to the long-term stability of iron ore prices, which reduced the need for spot trading. Without sufficient transaction size, the exchange struggles to set meaningful reference prices.
Beyond spot trading, the battle for pricing power is intensifying. On April 12, 2013, the Singapore Stock Exchange launched its first iron ore contract based on 62% grade prices in Tianjin. If China does not act quickly, it risks continuing to accept international prices in derivatives markets.
In October 2012, the National Development and Reform Commission commissioned a study on the impact of iron ore futures on the steel industry, which was accepted by the China Securities Regulatory Commission. A draft iron ore futures contract was completed by Dalian Commodity Exchange (DCE) and approved for listing.
Listing on the DCE represents a key step in launching the product, signaling that iron ore futures will eventually be available on the exchange. During the recent futures period, Liu Xingqiang, Chairman of the DCE, stated that the exchange plans to expand its product range, including coking coal, eggs, iron ore, and timber.
Industry experts believe that once iron ore futures are listed, they will create a complete supply chain for steel companies, enabling better risk management and procurement strategies. As of April 21, China's port inventory stood at 68.09 million tons, with iron ore prices hovering around $136.5 per ton, showing significant volatility over the past year.
Analysts like Wan Shan argue that iron ore futures should be introduced soon to help steel companies hedge against price fluctuations. However, concerns remain about the potential for market manipulation and the readiness of China's steel industry to manage such financial instruments effectively. As the battle for pricing power continues, the future of iron ore markets remains uncertain.
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