Notice the source-no doubt China controlled Beijing based media-certainly gives China's point of view- I will limit what I say so as not to insult Bao but e.g. China's steel industry fought market based spot pricing tooth and nail in favor of annual contracts effectively set by China -1 China based steelmaker was trying to use a poster ca 2010 to get a contract w CWRN at old annual contract pricing model.
Until 2009 China's bizarre buyers monopoly-picking 1 iron producer to negotiate with and essentially forcing others to follow suit-had led to prices of only 10-14/ton til 2002(buyer must've paid for shipping and trucking because shipping and trucking alone cost more than that)-
now that market based spot is a fact they want to see if they can "influence" it via their own spot platform. There have been many new platforms btw.
if ore prices fall too much the domestic chinese ore industry will collapse without heavy govt subsidies because as I've noted agmetalminer said 12-13-10 that China's internal average cost of production was 150/ton-thats when their ore averaged 30%-that average has reportedly fallen to 20% already.
If prices fall much below China's internal cost of 150/ton why would China buy ore from its own producers when they can get it cheaper on international market and save their own diminishing ore for a rainy day in the future when ore prices are much higher.
I like the sentence saying China should get ore at a discount because they buy so much of it. After Nixon was used to get most favored nation trading status for China-did China give its biggest customer - the U.S. a discount- no- they used the MFN status and currency manipulation to spark a lot of their growth via the historically unprecedented trade surplus w the U.S.-ca 1 trillion/year-used to fund guess what??
China is running out of ore and Australia and India are restricting and/or putting heavy export duties on iron exports. As Chinas internal ore quality continues to rapidly diminish all these things should put long term upward pressure on prices.
