The quarterly negotiated pricing system for iron ore is workable and is expected to remain in place, Baosteel Group Corp Chairman Xu Lejiang said yesterday.
Global miners, including Vale, Rio Tinto and BHP Billiton, this year abandoned a 40-year practice of selling ore to major steel customers at annual term prices in favor of quarterly contracts.
Xu also ruled out that pricing will revert to annual contracts nor it will be changed to indexed pricing anytime soon. Indexed pricing could create more volatility, although more transparent, in reflecting market movements.
Meanwhile, Baosteel's general manager, He Wenbo, said the global steel industry is going to face a long difficult period because of overcapacity and high costs, and a massive restructuring is needed.
"Some companies won't be able to get through the difficulties," He said at the 4th Baosteel Biennial Academic Conference.
A massive restructuring will happen, in particular in China, he said, calling for more innovation in the industry. Shanghai-based Baosteel has made achievements in making grain-oriented silicon steel which is used in the cores of high-efficiency transformers, electric motors and generators. The sector is set to benefit from China's plan to develop its smart grid.
China is consolidating the steel industry by creating bigger players.
In recent months, some local governments also rationed power supplies to steel mills to meet year-end energy-efficiency targets.
China produced 50.3 million tons of crude steel last month, up 1.5 percent from September on daily basis, according to the National Bureau of Statistics.
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