Ore Price Manipulations Cost China 170 Billion Yuan More

In the first eleven months, China imported 560 million tons of iron ore, six million tons less than the same period last year; while its import values went up $25.7 billion, or 170 billion yuan.

Iron ore prices have risen from $60 per ton last year to today's $170 per ton or above in the spot market. Robust global demand plays a role to boost the price. This year steel operations recovered significantly in South Korea, Japan and the European Unions, resulting in a surge in demand for iron ore. Ore supplies have long been falling short of demand. Despite a small decline, the numbers of foreign iron ore into the Chinese market this year remain huge in absolute terms.

Deliberate manipulation is another important factor behind the continued rise of the iron ore price. Larger traders with huge amount of money are likely to push up the spot prices by taking advantage of the quarterly-based iron ore pricing system for profit-taking.

China should establish an ore price index of its own as a countermeasure to hold down the cost pressure. A professional department familiar with this market should be set up to monitor and analyze the movement of the iron ore prices.

With new projects coming on stream in the years to come, global iron ore capacity will increase by 235 million tons in 2011, by 238 million tons in 2012 and 288 million tons in 2013. The supply tension may ease gradually.