No deals on iron trading platform

China's iron ore spot trading platform again reported zero transactions Monday, following four consecutive weeks of zero transactions. The platform was launched in May this year as a way to reduce speculation and improve transparency in pricing.

The total volume of iron ore offered on the platform has also dropped to 814,000 tons in the past week, down from 2.61 million tons four weeks ago, according to data from Beijing International Mining Exchange (BIME), one of the sponsors of the platform.

"Iron ore sellers are not willing to cut prices, but buyers are expecting lower prices considering the sluggish market conditions," Wang Chunsheng, deputy secretary-general of the China Iron and Steel Association (CISA), told the Global Times Monday.

Wang further explained that steel demand in northern parts of China has been declining as the cold weather has dampened demand from the construction sector. But demand in the warmer southern regions is stronger, which may have contributed to the divided market expectations between sellers and buyers.

The trading platform operates mainly online, but "most steel companies and iron ore traders at present still rely mainly on offline trading," Wang Guoqing, a senior analyst at Beijing Lange Steel Information Research Center, told the Global Times Monday.

Wang noted that the offers on the platform are small compared with the iron ore consumption of most steel companies, another reason behind the sluggish transactions on the platform.

"Take Baosteel, which produces some 40 million tons of steel each year. Its daily iron ore consumption may reach 160,000 tons," said Wang from Lange. But most offers on the platform are ranging from 10,000 tons to 100,000 tons currently.

Wang from the CISA also said that it is not very likely the platform will grow into a major source for companies to buy iron ore in the short term, since the platform cannot offer enough quantity and variety.

"The platform is mainly aimed at providing more transparency in iron ore prices, and it has already played a very important role for companies to track prices," he said.

However, Hu Yanping, an analyst at industry portal custeel.com, told the Global Times Monday that without enough quantity of transactions, the platform's role in tracking iron ore prices is limited.

The platform at present has 191 members, with 81 steel producers, 103 iron ore traders and seven foreign iron ore producers, including the world's three largest major iron ore miners - BHP Billiton, Rio Tinto and Vale. A total of 5.29 million tons of iron ore has been traded on the platform since its opening in May.

The iron ore spot trading platform is sponsored by the CISA and the BIME as well as China Chamber of Commerce of Metals Minerals and Chemicals Importers and Exporters.