FMG joins China iron ore trading platform

Australian miner Fortescue Metals Group (FMG) yesterday joined China's iron ore trading platform, the China Beijing International Mining Exchange (CBMX) said in a statement Tuesday.

FMG is the first foreign iron ore supplier to join the domestic platform, which was launched on January 16 and is intended to help the world's largest iron ore buyer gain more influence in global pricing.

"The platform aims to prevent monopoly practices and price manipulation in iron ore trading, and we welcome more domestic and global suppliers, mills and traders to join," the statement said.

The platform currently includes 26 major Chinese steel mills and traders such as Baosteel, Shougang Group, China Minmetals Corp and Sinosteel Corp.

Industry experts said yesterday that the cooperation between FMG and CBMX will benefit both sides, and will strengthen Chinese buyers' bargaining power over iron ore prices with foreign miners.

"FMG, the world's fourth largest iron ore producer by capacity, has been more active in cooperating with CBMX than the top three iron ore miners, as it aims to triple its annual output by 2015 and boost sales mainly in the Chinese market," Xu Xiangchun, a senior researcher at consultancy mysteel.com, told the Global Times.

"CBMX has made a breakthrough by involving an iron ore supplier in the platform, which will attract more domestic steel mills and traders, as well as adding pressure to the top three iron ore producers," Zhang Jiabin, an analyst with steel industry portal umetal.com, said yesterday.

The top three producers - Vale SA, BHP Billiton and Rio Tinto - are currently in talks to join China's iron ore trading platform, Wang Xiaoqi, vice chairman of the China Iron and Steel Association, told reporters in Beijing last month. But so far the three giants have kept silent on their interest in the Chinese platform.

Zhang said that whether the Chinese trading platform can play a role in global iron ore pricing will depend on the attitudes of the top three miners.

"The categories of iron ore that FMG can produce are too limited and can't satisfy the variety of demand from Chinese buyers," he said.

FMG's participation has also raised the Chinese platform's competitiveness over its main rival, a Singapore-based iron ore trading platform called GlobalOre that BHP Billiton has backed, Xu said.

"Currently none of the Chinese buyers have signed on to the GlobalOre platform, so CBMX has taken a step forward in the competition," Zhang noted.

The three leading miners in 2010 abandoned a 40-year custom of setting prices annually in favor of quarterly iron ore contracts. The plunge in iron ore prices last year has accelerated a move to shorter pricing methods and closer to spot.