CISA awaits approval for its iron ore index

Wednesday, 27 Jul 2011

China Daily reported that China Iron & Steel Association, the country steel lobby has completed the draft of an iron ore index and expects its publication soon and a move that analysts said will more accurately reflect the Chinese market situation.

Mr Li Xinchuang vice secretary general of CISA told China Daily that the draft awaits approval and will be discussed at the association's annual meeting on Thursday.

He said that "Platts reflects only a small portion of the iron ore trade that passed through the spot market, and it doesn't reflect the real market. CISA a representative of Chinese steelmakers needs to voice a more transparent and fair index in the market."

Mr Li said "The new iron ore index will calculate spot iron ore prices based both on the imports and domestic production. The reason big miners adopted Platts index is because the prices benefit them most."

The three biggest ore miners abandoned a 40 year tradition of setting prices annually last year and shifted to quarterly or monthly based contracts which are linked to the iron ore indices.

An executive from one of the three miners who spoke on condition of anonymity said it is good news that there will be more voices to closely reflect the Chinese market. He said that "We choose an index that is more accurate and objective to mirror the market."

Analysts said the question is whether China iron ore indices will be acknowledged in the domestic and overseas markets.

Chinese consultancy firm Custeel.com issued China first spot price index for iron ore on July 4. The index uses the transaction price for domestic spot iron ore as its reference for calculation and the outcome is a weighted average result of the spot price for import and domestic iron ore.

Ms Zhang Lin a senior analysts with Beijing Lange Steel Information Center said "There is no authoritative Chinese organization to publish an iron ore index."

She said that "Lange is also considering publishing an iron ore index. However, if these indices weren't recognized by both overseas miners and domestic mills they wouldn't have meaningful value. She added that CISA has multiple channels to collect data and can make it more authoritative.”

(Sourced from China Daily)