Iron Ore Bond Financing Should Help Chinese Metallurgists

Baoshan Iron and Steel believes that the Chinese method of financing the use of iron ore can help local metallurgists by reducing raw material prices. The Baosteel chairman said that "financing of iron ore import deals ran into risks, but if mitigating those risks can bring iron ore prices back down to sustainable levels, it will be a boon for local steel producers."

Banks' intentions to cut loans to the steel and iron ore sector are believed to have been part of efforts to cut liquidity and should help implement the government's environmental policies, but this is unlikely to affect large steel producers.

Fu Yang, an analyst at the Shanghai Guotai Junan Futures Center, said that "Port stocks are too high and shipments will increase in the second half. For steel mills and traders, the problem is that banks are still tightening credit and if the loans are not repaid," then they will be forced to sell iron ore for cash, which could cause oversold in the market and drag prices down, maybe even to $ 90 per ton. "

The China Banking Regulatory Commission has ordered an investigation into the use of iron ore as collateral for financial transactions. The move prompted a sharp 4.5 percent drop in iron ore futures this week, but the situation has stabilized since then as the market waits for no further action.