For a long time, the iron ore production chain was characterized by a structural imbalance: international mining companies engaged in mining had exorbitant profitability, while domestic steel mills engaged in mining were struggling to make ends meet - a stark contrast, according to the Chinese Association of Ferrous Metallurgy. Such an uneven and irrational distribution of interests along the value chain hinders the healthy and sustainable development of the company. the whole industry. In recent years, there have been growing calls from various sides for a restructuring of rules and a normalization of values. The situation in the iron ore market is currently undergoing profound changes, and a more fair, transparent and sustainable new market order is gradually taking shape, CISA said.
First of all, thanks to its huge domestic market, China has effectively insured itself against factors related to global supply. China is the largest consumer of iron ore in the world. Stable production and well-established logistics in China help offset supply fluctuations due to uncertainty. This gives global mining companies a clear picture of demand, so they feel confident investing heavily in long-term exploration and development projects. In short, the stability of China's market and its huge size guarantee a steady increase in global iron ore supplies.
Secondly, the iron ore market is more diversified and the supply chain is developing. With increased global investment in iron ore mining and the launch of major projects in West Africa and other regions, the supply curve has leveled, resource allocation has improved, and the market has become more resilient and competitive. These supply-side measures will help reduce costs and risk premiums throughout the production chain - and this is ultimately good news for every steel producer.
Moreover, the elimination of the structural disparity of interests between companies engaged in the production and marketing of products has become widespread. целью.
In fact, companies involved in the production and marketing of products are not playing a zero-sum game. They need to work more closely together to distribute profits more fairly throughout the chain, which will lead to mutual benefits. Only if metallurgical enterprises engaged in steel processing occupy a fair position in the market, comparable to the market advantage and reasonable profitability from operating activities allow them to maintain stable demand for iron ore, and only then mining companies will be able to obtain long-term and stable profit.
Finally, we are witnessing the emergence of a more objective and transparent pricing system for iron ore. China has the world's largest portside spot market, and its prices more accurately reflect real supply and demand. The launch of the RMB iron ore price index provides the market with an alternative to the dollar index, making price determination more representative and transparent.
In conclusion, CISA stated that promoting the use of yuan-denominated price indices in international trade would help limit speculative capital flows and allow prices to better reflect changes in supply and demand fundamentals, which represent a significant improvement in the global commodity pricing system. iron ore.
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