Consensus over iron ore pricing elusive

Mumbai : By virtue of their owning high-quality iron ore assets across continents and controlling two-thirds of the global supply of the commodity, the world’s three leading miners have the sinews to force changes in sale contract terms, overriding any objections by steelmakers. China, which imported 618.64 million tonnes of ore in 2010 to supplement the increasing domestic supply of the mineral, remains unequivocal in its criticism of shorter-term contracts allowing miners to reap huge profits as steelmakers see their margins shrink. That the complainant has a point is not to be denied. Even while foreign origin ore buying by China (the world’s biggest producer and consumer of steel) fell 1.4 per cent last year, the import bill climbed as much as $29.28 billion to $79.43 billion, thanks to the average import price rising 61 per cent to $145 a tonne. This ballooning of the import bill squeezed the Chinese steel industry’s profit margin to 2.9 per cent in 2010 from 7.3 per cent in 2007. Incidentally, the average profit margin of all industrial enterprises in China last year was 6.2 per cent.