Rio Tinto's implementation of iron ore monthly pricing steel mills' profit differentiation will increase

The further short-termization of the iron ore pricing system has once again been supported and promoted by large mines. Yesterday, news from Rio Tinto said that the company could offer steel mill customers new pricing agreements, such as monthly pricing. It is said that the monthly plan and the quarterly pricing system coexist, and customers can choose their own. With the joining of Rio Tinto, the short-term process of iron ore pricing, which is considered to be a trend, has taken another step forward. Rio Tinto publicly supports monthly pricing Yesterday, the Australian Financial Review reported that Rio Tinto's marketing director Warwick Smith said that Rio Tinto's customers can choose a new pricing model, such as monthly pricing, index pricing, etc., not necessarily Only in accordance with the existing quarterly pricing system. This statement is considered by the market to be Rio Tinto's support for a shorter-term pricing model. However, Rio Tinto stressed to reporters that the monthly and quarterly pricing systems can coexist, and the company is not forcing steel mills to accept. This strategy is very similar to BHP Billiton. As the pioneer of indexed pricing, BHP Billiton has begun to offer customers a variety of pricing system solutions, including quarterly, monthly and even spot, and said that "steel mills are free to choose." This is regarded by the market as an important development in the gradual short-term pricing of iron ore. The reporter learned that Bao Yi'an, president of Rio Tinto China, reiterated at the press conference at the end of January that Rio Tinto will continue to use the quarterly pricing model. However, from the current attitude change of Rio Tinto, the mine obviously cannot really refuse the advancement of the short-term pricing system. Another ore giant, Brazil's Vale, has repeatedly expressed its support for quarterly pricing, but it has not yet made a new statement. Chinese steel mills said that they have not received any news of Rio Tinto's monthly offer. The Shanghai Securities Journal reporter yesterday called a steel mill in Hebei with Rio Tinto that had an agreement to purchase minerals. The manager of the company's International Trade Department said that he has learned that Rio Tinto will change the pricing model, but has not yet received a new quotation document. The profitability of steel mills will be differentiated under the strong push of the mine. The short-termization of the iron ore pricing system is increasingly becoming the common expectation of the market. This short-term process is complicated for Chinese steel mills. Some analysts believe that this will further expose the weakness of state-owned large steel mills that are mainly mines. For the time being, short-term pricing will be less favorable to state-owned steel mills than private steel mills. For state-owned enterprises with a high proportion of agreements and mines, the price difference between the long-term coal mine and the spot mine is an important competitive advantage. Now that the ore pricing cycle has been shortened, the price difference between the agreement mine and the spot mine has gradually decreased, and the advantages of the state-owned steel mill have been lost. The disadvantage of high cost and cost is even more prominent. Private steel mills have always focused on buying spot trade mines. Therefore, short-term pricing has far less impact on state-owned enterprises. Some analysts believe that the short-term pricing of ore will further promote the profit differentiation of steel mills. Currently, listed state-owned steel enterprises need more thinking and countermeasures. In addition, for the Chinese steel industry, changes in the pricing system will also become a “double-edged sword” in market competition in some cases. If the ore is in a downtrend channel, short-term pricing is beneficial to the steel mill side. However, if the price of the mine continues to consolidate and there is still a rising expectation, the steel mills prefer a long-term, stable supply agreement, because it is more conducive to the formulation of the scheduling plan. “If we receive a monthly quotation document, we have to study it carefully before we can make a choice.” The steel mill said to reporters. For the time being, the domestic spot mine market is showing a weak consolidation trend, and steel mills are still waiting to see. But the long-term trend, there are certain differences in the market. Most of the views are that around the year 2014, the global iron ore supply and demand structure will be reversed and the price of the mine will fall as a whole.  

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