Quarterly pricing of the hottest iron ore is a for

2022-09-23
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Quarterly iron ore pricing is a foregone conclusion steel mill swap transaction

quarterly iron ore pricing is a foregone conclusion steel mill swap transaction

China Construction machinery information

Guide: in the face of the reality that quarterly pricing has completely replaced the long-term association mechanism, Chinese steel mills are helpless to accept, but also seeking more ways to stabilize risks. The person in charge of a large private steel plant in China revealed to that they had begun to operate some swap products on a small scale since a few months ago

in the face of the reality that quarterly pricing has completely replaced the long-term association mechanism, Chinese steel mills are helpless to accept it, but also looking for more ways to stabilize risks. The person in charge of a large private steel plant in China revealed to that they had begun to operate some swap products on a small scale since a few months ago

"it is mainly trading on the Singapore Stock Exchange, mostly locking the price for half a year." The person said that the reason for this transaction was mainly to prevent the risk of rising iron ore prices. But because he doesn't have much experience, in his simple concept, swap trading is more like "playing stock betting"

the so-called iron ore swap transaction refers to the iron ore index as the transaction target. Because the iron ore index cannot be delivered, the maturity is settled in cash. The process of cash settlement inevitably involves two prices, one is the agreed buy/sell price, and the other is the reference price specified in the contract, such as the average price of iron ore index in a certain period of time. The difference between the two is the gain or loss of swap traders, which is equivalent to a buy sell operation of iron ore at these two prices

it is understood that in addition to the iron ore swap contracts and settlement services launched by the Singapore Exchange and Deutsche Bank, the London Clearing House (LCH) is also providing clearing services for iron ore swap contracts. In addition, at the end of 2009, the Intercontinental Exchange (ice) also announced that it would provide iron ore swap clearing services with reference to the Platts index produced by Platts energy information

learned that, in fact, after the iron ore long-term association was replaced by quarterly pricing, the sharp fluctuations in iron ore prices in the later stage have been clearly placed in front of steel mills, and swap products trading has also been regarded by steel mills as a "self-help" method to lock in costs, and they have begun to carry out research

at the recent international steel conference, Shagang chairman Shen Wenrong told after the meeting that shagang group had begun to study the Singapore Platts index and would continue to study the swap products of the Platts index

a large domestic iron ore trader admitted that swap transactions do seem to help enterprises lock in costs, because most steel mills and traders "don't understand" on the one hand, and "fear" on the other hand, mainly because they question whether their operations are fair and transparent, so they haven't participated in large-scale. But he said that if the price rises further, traders and steel mills will definitely need some way to lock in the cost of ore, whether they are forced or actively involved in swap transactions

in fact, with the rise of spot prices, the volume of iron ore swap transactions in the international market has increased significantly. According to foreign reports, the trading volume of iron ore swap contracts on the Singapore exchange increased by 60% in April, reaching a record 4446 contracts

but there is no large state-owned steel plant here. An insider of a state-owned steel plant told that the other side of using swap contract transactions to avoid risks is that Yinguang group and Southwest University of science and technology are committed to the huge risk of research in the field of energetic materials. Therefore, state-owned steel mills have been very cautious in this regard, and the use of tube bundle polymer composites in the field of wind energy is also growing. If you want to "test the water" swap contract transactions, you must go through layers of approval, which is basically very difficult

"but under the manipulation of international financial speculators, for inexperienced Chinese enterprises, the risk of entry is huge." Bai Yimin, director of the national Japanese economic society of the Chinese Academy of Social Sciences, expressed concern in an interview. He believes that the reason why the three major mines hope to turn iron ore into a futures market is actually to disrupt the resistance of the Chinese people and turn the steel industry into a financial and speculative market. Indeed, in addition to Morgan Stanley, Goldman Sachs and Barclays, which jointly launched cash settled iron ore speculation transactions as early as may 2009, many financial giants have entered the iron ore market one after another

Xu Xiangchun, my director of iron and steel information, said in an interview that from the current situation, the transition of iron ore to indexation is an unavoidable problem, especially when the three mines have both monopoly status and financial capital support, they are bound to earn higher profits through this way

"don't face it because it has risks." Xu Xiangchun said that under such circumstances, we should not only strive for the initiative in commodity prices, but also strive for bargaining power in the financial market. First, this is caused by the irregular arrangement of the molecular chain. All steel mills should actively cultivate talents who are familiar with the financial market. At the same time, the state should support relevant domestic financial institutions to study China's price index model and study the corresponding hedging mechanism to resolve risks for enterprises

on the other hand, 50% to 60% of China's iron ore is spot traded, so the current international mainstream iron ore index is designed based on the comprehensive sea freight price on the basis of China's iron ore spot market. From this point of view, relevant domestic institutions should consider establishing domestic iron ore index trading venues and formulating their own rules of the game. In this case, even if we have to implement index pricing, we can insist on setting up index trading places in our convenient country and using our own price indexes to reduce the risk of international financial speculation

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