Government-backed CBMX: Another game changer for iron ore?

Apr 05, 2012 | 05:31 AM |

A new government-backed trading tool for iron ore is the latest bid from China to wrest iron ore pricing power back into the hands of its mills.

The China Beijing International exchange (CBMX), jointly initiated by the China Iron & Steel Assn, and the China Chamber of Commerce of Metals, Minerals & Chemicals Exporters & Importers (CCCMC) is set to start trading on May 8.

Set up in response to the breakdown of the historical benchmark pricing system and a move by major iron ore producers to shorter term pricing, the CBMX is a virtual trading floor where iron ore producers can sell cargoes to steel mills on an anonymous public platform.

It allows spot iron ore transactions to be settled via on-screen bids and offers.

CBMX already numbers some of China’s biggest steel mills among its members, including Baosteel, Hebei Steel, Wuhan Steel, Shougang and Angang, as well as large iron ore traders China Minmetals and Sinosteel.

Market majors sign on
Twenty-six Chinese mills and traders had registered as members of the platform as of February 27, and the last week of March saw three of the world’s biggest iron ore producers sign up.

Fortescue Metals Group (FMG), Australia’s third-largest producer of iron ore, became the first major seaborne producer of iron ore to join the platform, on March 22.
Anglo-Australian miner Rio Tinto and Brazil’s Vale, the world’s largest producer of iron ore, joined the CBMX a week later. ....