From The Australian:
…BHP’s China boss, Chai Tan, met Chinese industry officials last week to update them on BHP’s proposed demerger, among other issues.
After the meeting the National Development and Reform Commission issued a statement which raised the issue of iron ore prices…According to the report from newsagency PaRR, the department told BHP executives that “BHP and other iron ore suppliers should avoid abusing dominant market positions” and that there should be “a new pricing model” in the global iron ore market.
Chai Tan met NDRC deputy inspector Li Zhong Juan who reportedly said “that the current iron ore pricing model was problematic”.
Ms Li said issues included the fact that pricing for big markets was determined by small sample sizes, that bidding processes were opaque and not public, and that long-term contracts did not provide sufficient benefits.
“We should look for a new pricing model at a time when there are changes in the supply-demand dynamic and iron ore prices are entering a downward spiral,” Ms Li said, according to the statement.
These are absolutely problems with the system. It should be a floating price on an exchange somewhere.
Probably scuttlebutt and I’m not sure the Chinese could even do it given the ongoing ownership concentration, but what an irony if Beijing were to press this issue since it was BHP that so desperately sought to monopolise iron ore supply in aiming to buy Rio and then proposing to merge iron ore operations when the market was at its peak.
It gives you a little read on how China will think about giving away local production to the majors.
