The world’s three largest exporters will follow Fortescue Metals Group Ltd. (FMG), Australia’s third-largest shipper, in joining the platform that will officially start operating in the first half of the year, Zhang Changfu, vice chairman and secretary general of the China Iron and Steel Association, said today in an interview in Shanghai.
The agreement will bring steelmakers and producers into a common system two years after the mining companies broke with a 40-year custom of annual pricing in the face of opposition from China, the world’s biggest steelmaker. China announced the creation of the trading platform in Beijing on Jan. 16.
“All of the major suppliers will sign accords soon to join,” Zhang said. “We expect to create a fair, transparent environment for spot iron ore trading. We’ll set up a minimum volume of ore that they should sell through the platform.”
The nation set up the platform to strengthen pricing power and improve transparency, according to the China Beijing International Mining Exchange, which set up the online platform along with the association.
“We are positively studying participation and are in principle supportive of any platforms that support market transparency and liquidity,” Fiona Martin, a spokeswoman for Melbourne-based BHP, said in an e-mailed response to Bloomberg questions. “Over the past year, we have actively worked with customers and other industry participants on such initiatives, such as GlobalORE and the China spot platform.”
Rio Tinto isn’t ready to comment on the new platform, spokeswoman Karen Halbert said in an e-mailed response to questions.
China is the largest iron ore importer, accounting for 60 percent of the global trade by volume, the exchange said in January. The country also has the world’s largest spot iron ore market. Having major foreign miners involved may solidify the trading platform’s position to have more influence over the price of the raw material.
The agreement will require the producers to sell a pledged volume of ore through the platform, Zhang said, adding that the country may produce 680 million to 700 million tons of steel this year.
Chinese steelmakers such as Baosteel Group Corp., Hebei Iron & Steel Group, Wuhan Iron & Steel Group, Beijing Shougang Co. and Angang Steel Co., as well as traders such as China Minmetals Corp. and Sinosteel Corp. agreed to become platform members in January, according to the exchange.
Melbourne-based BHP, the world’s biggest mining company, said this week China’s steel production growth is slowing as the world’s fastest-growing major economy starts to shift to focus more on consumers than large building projects.
A Chinese manufacturing index indicated a worse contraction this month, bolstering the case for Premier Wen Jiabao to add measures to sustain growth even as he prolongs a campaign to cool property prices.
GlobalORE, with offices in Singapore and London, is also seeking to develop a standard contract for iron ore to be traded on its online platform and will require physical delivery. BHP said in October it’s supporting development of globalORE and may become a founding shareholder.