China steel mills Alliance collapsed by three major mines to accelerate Overseas Exploration

Traders increase the import volume and small and medium-sized steel mills sign long orders

Editor's note:

In this year's iron ore negotiations, the Chinese side has been in a passive position, so that after the world's major steel mills and the three major mines have reached the price agreement, the Chinese side is still struggling. The CBN reporter found that the Chinese steel mills union is being collapsed as domestic traders receive large quantities of goods and small and medium-sized steel mills sign long orders with the three major mines.

In view of this situation, Chinese steel mills have accelerated overseas prospecting. According to the latest news yesterday, WISCO, which imports the most ore from China, spent $0.4 billion to build a mine in Brazil. Previously, WISCO, Baosteel and Angang also invested in overseas mines.

"Overseas prospecting" may be an important way for Chinese steel mills to get rid of the "control" of the three major international mines. Although it has not yet played a role in the Annual Iron Ore Negotiation, the effect will be revealed in the future.

Zhang Li, an iron ore trader, is reluctant to release the goods recently. She estimates that the price of the ore may rise later. After talking with many colleagues, she is ready to sell the goods.

She is located in an iron ore trading company with a foreign capital background. The financial crisis since last year has caused nearly half of the high-price ore imports by the company. In the second half of the year, her business has almost stagnated. But with the gradual resumption of production in steel mills, her company has been purchasing goods faster and faster in recent months.

This is a typical iron ore trading company. In recent times, it has been widely spread that the small and medium-sized steel mills of the "Inverted" Iron Ore negotiations are using these traders to "Climb" the relationship with the three mining companies.

In the past, most small and medium-sized steel mills had no chance to sign long-term agreements with the three mining companies. Now, the three mining companies are gradually collapsing the steel mills alliance established in China by expanding their sales channels.

Traders increase import volume

A series of data shows that the three mining companies have increased their spot sales.

Customs data display, 1 ~ In May, China imported 0.242 billion tons of iron ore, up 0.192 billion from 26% tons in the same period last year. According to data from the National Bureau of Statistics ~ In May, China's total domestic ore was 0.296 billion tons, down 6.0% year on year.

Du Wei, director of iron ore channel of the United Metal network, told the CBN reporter that although the domestic ore has only dropped by 6.0%, the iron powder used by steel mills has dropped by more than 6.0%. The reason is: the quality of domestic ore is very low. The ore produced by the mine generally needs to go through the industrial and commercial processes to produce high-purity iron concentrate powder and then sell it to steel mills. Due to a certain delay, the consumption of iron concentrate powder by steel mills is reduced, this will cause the mine to continue production for a period of time before slowing down the pace of production.

As the total import volume increases significantly, the export volume of the three mining companies to China also increases significantly. Customs data display, 1 ~ In May, 48.5724 million tons of imported Brazilian mine, 98.0135 million tons of Australian mine, And 54.1901 million tons of Indian mine, respectively, increased by 13.42%, 41.32%, and 10.72% over the same period last year.

The export volumes of the Australian and Brazilian mines are mainly from Brazil's freshwater Valley, BHP Billiton and Rio Tinto in Australia, which shows that the export volumes of the three mining companies to China have increased significantly. Among the total imports in the first five months of this year, the Brazilian and Australian mines totaled 0.146 billion tons, accounting for about 60.61% of the total imports.

According to the fact that the customers of the three mining companies in the past were both large and medium-sized steel mills with little spot sales, there would be a conflict-after the financial crisis, many Chinese steel mills that had previously signed a long association with the three mining companies, due to the survival problem, the contract had to be destroyed. So where did the goods sold by the three mining companies go?

The only explanation is that traders are taking over the disk. Shan shanhua, Secretary-General of the China Iron and Steel Industry Association (hereinafter referred to as the "China Iron and Steel Association"), told the CBN reporter that this year ~ In April, the import of iron ore by production enterprises dropped by 4 million tons, while traders imported more than 39 million tons.

Zhang Li told CBN reporters that the company has indeed expanded its market in Australia this year and has imported some iron ore from there.

The head of a private iron ore trading company with an annual import volume of more than 3 million tons in Tianjin also told CBN that the company had previously purchased goods only from the Indian market, but now it has expanded to the Australian market, and began to cooperate with Rio Tinto.

The Iron Ore Imported from Rio Tinto is sold to some steel mills with an annual output of about 3 million tons of steel at the spot price. "Of course, smaller steel mills are also my customers ." He said.

In terms of spot sales, the three major mines have been recognized. A few days ago, BHP Billiton's Chief Executive Officer Gao Reith told a domestic media that BHP Billiton sold more than 20% of iron ore in the spot market in the previous quarter. Rio Tinto is better at spot promotions. Rio Tinto's Executive Officer Sam Wales told Chinese media that this year, Rio Tinto's spot sales have jumped to 50% of its total sales of iron ore worldwide. Vale, which has never been sold in the spot market before, began selling in the spot market this year.

Small and Medium Steel mills sign long orders

Compared with the same period last year, domestic small and medium-sized steel mills are importing more and more iron ore. As a result, these originally disadvantaged groups have become the targets of the three mining companies to lobby.

Since this year, the long term agreement between small and medium-sized steel mills and the three mining companies has been heard. The news first came out from a city newspaper in Beijing. It was reported that 35 small and medium steel companies had reached a long-co-mining agreement with Brazil's Vale, and the 35 steel companies and vale reached an import volume of about 50 million tons.

It turns out to be a misleading message. Because these small and medium-sized steel mills have not signed the current so-called agreement on Iron Ore Negotiation, but a long-term agreement on the procurement volume. Large steel enterprises such as Baosteel Group and WISCO group have also signed long-term procurement agreements with the three mining companies for several years.

"The agreement on the amount of iron ore is not the same as the price agreement. The price agreement is negotiated by the Negotiating representatives. In terms of the procurement volume, the steel mills themselves signed the agreement with the mining company ." Said Du Wei, an analyst at the joint metal network.

The three mining companies also admitted that they have opened up small and medium-sized steel mills in China. At the 2009 Metallurgical Mineral Products International Conference held in Nanchang on April 16 this year, the President of Vale China told the CBN reporter that many small and medium steel mills were among the customers developed by Vale in Huaxin.

A person in charge of Shanxi meijin Iron and Steel Co., Ltd. with a production capacity of 2 million tons said in an interview with the CBN Reporter: "the company's previous internal and external mine procurement ratio was, however, it is more cost-effective to use external mines." He asked whether he had signed a long-term procurement agreement with the three mining companies.

Du Wei said that even if the small and medium-sized steel mills signed a long-term procurement agreement with the three mining companies, the price is still calculated according to the final negotiated price. From this perspective, long-term procurement agreements between small and medium-sized steel mills and the three mining companies will not affect iron ore negotiations.

Even so, the three mining companies have opened up more customers, and the sales volume has become very promising. Once the market changes, the three mining companies will only increase their bargaining weights and will not decrease.

"Since the beginning of this year, many small and medium-sized steel mills are still profitable when they are at a loss. If the three mining companies have signed long-term agreements with small and medium-sized steel mills, then they may sell the products to small and medium-sized steel mills with larger profit margins at the price of changxie." Said one analyst who asked not to be named.

Small and medium-sized steel mills may purchase ore at a high price during the economic downturn in order to obtain changxie ore for a long time in the future. However, the only way for small and medium-sized steel mills that do not have the import qualifications to import changxie ore from the three major mining companies is through traders with the import qualifications, and the policy is "edge ball ".