As the largest iron ore buyer in the world, China should have the right to decide the price; however, because there is no unified price negotiation mechanism and some domestic speculators illegally manipulate the price, China has to follow the rules of prices established by foreign suppliers, noted an editorial of the
21st Century Business Herald.
Issued by the General Administration of Customs, recent statistics show that in June, iron ore imports reduced by 9.7 percent compared with last year. The import volume fell to the lowest point since February in 2016. Also, due to the increasing iron ore price, China has spent lots of foreign exchange reserves to purchase imported iron ore.
The reason why China needs a large amount of imported iron ore annually is that real estate development and other infrastructure construction stimulate demand, and while the domestic production capacity of iron and steel industry is increasing, the quantity and quality of domestic iron ore cannot meet demand.
Yet, despite being the biggest buyer of iron ore, China is always facing the problem of rocketing iron ore prices, and there is no option to bargain.
The objective cause is that because of disasters, the global supply of iron ore has decreased. A dam break in Brazil resulted in the closure of large mining areas, and two mines in Australia reduced delivery because of typhoons. The shortage of iron ore therefore resulted in price rises.
In addition to the tight supply from overseas mines and rising demand from domestic steel mills, some speculators have illegally distorted the market via unjustified price increases and price manipulation, says the editorial.
Japanese iron and steel makers are working together to negotiate with foreign iron ore suppliers. The editorial suggested that Chinese iron and steel companies consider the same way to improve their bargaining power.
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