Chinese steel mills win domestic iron ore pricing

Mining News -Two sources with direct knowledge of the matter said that BHP Billiton has agreed with two leading Chinese steel mills to include the China-based Mysteel price index alongside the Platts index for contracts for the new fiscal year. Fortescue Metals Group, the world’s fourth-largest iron ore miner, has also agreed to include price indices published by Mysteel and local rival Custeel in price setting, Custeel and a source at a steel mill said. The move marks a major step in the evolution of iron ore pricing after the industry abandoned decades-old closed door talks between miners and steelmakers in 2010 in favor of a daily price index.

While it’s not expected to have a big impact on prices, it will boost the confidence of Chinese buyers that prices reflect domestic demand and is in line with China’s desire to increase its influence over commodity pricing. Steelmakers and miners currently price annual contracts against benchmark indices set by agencies outside China, mainly S&P Global Platts based on its assessment of the market. Miners have previously adopted indices other than Platts for spot market or electronic platform sales, including the Metal Bulletin Iron Ore Index, but annual contracts make up the bulk of sales.