China Steel Association: Steel enterprises go to sea to buy iron ore to grab iron ore negotiation right

“In the future, the pricing model for imported iron ore based on current quarterly prices is extremely unfavorable to Chinese steel companies!” said Deng Qilin, president of the China Iron and Steel Association and general manager of Wuhan Iron and Steel (Group) Corporation, during an exclusive interview with this reporter.

“Since 2010, steel production capacity has been released too quickly. At present, domestic steel production capacity is still in excess, and the state should continue to introduce taxation supporting policies to promote the elimination of outdated production capacity by local governments,” Deng Qilin suggested.

Pricing model affects costs

For the third quarter of the import of the three-point spot price as the basis for pricing in the fourth quarter, Deng Qilin believes that this pricing model will aggravate the magnitude of cost changes for large steel companies and other companies. At present, under the premise that more than 80% of China's steel industry raw materials rely on imported iron ore, the "quarterly pricing" model is extremely unfavorable to the development of China's steel industry. Deng Qilin suggested that the Ministry of Commerce should be involved in the negotiation process of the three major mines.

Method: Buy more minerals and mines abroad

According to Deng Qilin, the most important way to increase the bargaining power of Chinese companies in iron ore is to make strategic investments directly into overseas high-quality minerals. The state should also issue relevant policy preferential measures to encourage enterprises to go to the sea to “buy mines” and avoid falling into a passive situation where “bargaining power is adjacent”.

Deng Qilin believes that the current rise in the price of imported iron ore is deteriorating. The state should encourage the acceleration of domestic iron ore mine development, ensure that domestic mines account for more than 40% of the share, and at the same time increase the investment and development of foreign iron ore resources. For domestic large-scale iron and steel enterprise groups to take the lead, absorbing small and medium-sized iron and steel enterprises, financial investment institutions, private capital, joint ventures and cooperative mining, etc., should give appropriate encouragement.