From Reuters, BHP responds to China:
“We aim to improve transparency by increasing liquidity in the spot market,” BHP said in a statement e-mailed to Reuters.
“We sell significant volumes on a spot basis, including through widely accessible trading platforms, irrespective of the iron ore price,” it said.
Spot market trades are used to set index prices, which producers andsteel mills in turn use as benchmarks for pricing monthly and quarterly iron ore supply contracts.
“It’s more the art of war than manipulation,” said a commodities analyst familiar with the way Australian iron ore miners price cargoes to China.
“Both sides use the pricing mechanism to their advantage and it’s a big money game. If you can extract another 10 dollars per tonne out of your ore, that’s a significant margin to make.”
In response to the planning agency’s specific allegation that some miners were buying iron ore cargoes on the spot market in order to lift prices of the key steelmaking material, BHP said it was “very normal” for steel mills, traders and producers “to both buy and sell cargo to balance their books”.
“Such transactions occurring on the platforms is to the benefit of all market participants in that it supports transparent market pricing and market liquidity,” BHP said.
BHP bought 100,000 tonnes of iron ore in January in a rare move that market participants saw as a strategy by producers to stem a decline in prices.
“We will not comment on what transaction we have or have not done,” the company said on Thursday.
I wonder where this is going. Nowhere good.