Who is playing with the iron ore market?

Just a few years ago, iron ore was Australia's only one of the most expensive export commodities. Its price fell into a strange pricing model. People dubbed it the “copulation game”—in this game, it is usually Play a game of golf first and then close deals in private.

When the iron ore management and marketing team encountered management and marketing teams from Asian mills, the two sides competed to compare their respective production plans and future supply and demand forecasts. If both sides are guided by the principle of seeking truth from facts, this would have been a matter of gentlemanliness and will be able to reach a fairly fair and objective consensus on iron ore prices in the future.

However, the facts are not so ideal. Both sides are trying to show that they are the most competitive players in the game, and they are not hesitating to fake the data. As a result, the iron ore pricing war has intensified, even leading to China, Australia and Brazil. Diplomatic issues between the three countries.

Nowadays, no one rarely finds a pleasant place where people sit together to spread the innocence of the little lie, and replace it with a quarterly pricing system. This pricing system will eventually affect the iron ore daily price index. And this system is basically the same as the London Libor (the London Bank Interbank Offered Interest Rate System).

Because these price blowers have always been convinced by the facts stated by industry insiders, the Libor interest rate structure and the latest news from Asia have touched the heart of the blowers.

Assume that Libor is the master board for the upcoming issues in the iron ore market. The designated banks compare their borrowing rates and then lay out the results in order to set the world interest rate. When the economic crisis engulfed the world in 2008, Libor and other players who violated the regulations realized that the cost of borrowing was huge. In order to maintain their own image, they no longer followed this rule. They believe that the foolproof approach is to draw up a new interest rate, and this interest rate that affects the world’s $300 trillion is being manipulated by them. However, fraud investigations are now being conducted all over the world. The British Bankers Association, which manages bank operations, is also reviewing Libor's constitution.

Similar to Libor, iron ore pricing is also dependent on the players in this game who inform the bookkeeper about the price of iron ore and future supply and demand forecasts. Unlike Libor, iron ore pricing does not require playing a game of golf first. Instead, the data agency mechanism in the hands of the transaction information collector directly reports the price of iron ore. This is based on the data of the day and the so-called real information of game players. .

Last week, there were different opinions about the market price of iron ore and the comments. This made price blowers wonder why the Libor story is about to repeat itself.

Iron Ore Game Rules Change In the first quarter, the China Iron and Steel Association abolished the iron ore price manipulation mechanism. A few years ago, the China Iron and Steel Association had called on its members to boycott sharp increases in iron ore prices and caused a riot in the iron ore market. According to the China Steel Association, China's steel demand will decline significantly in 2012, with the growth rate falling from 8% in 2011 to 4%. Nearly half of the official governments expect China's overall economic growth rate to be only 7.5% in 2012. If the China Steel Association says it is true, then we better forget the "19th hole" story (meta Libor incident), Australia's iron ore productivity is high, Brazil has expanded iron ore projects in multiple locations around the world, so steel production An increase of 4% will inevitably lead to a significant drop in iron ore prices. However, in view of the dim outlook of the China Steel Association, one must suspect that the three major iron ore indexes are relatively stable, 62% of iron ore is 142-144 US dollars/ton, and Australian iron ore is traded on the Chinese spot market. Prices are within this price range. The information conveyed by the Chinese mines and the mines in Australia and Brazil contradict each other. Blowers cannot help wondering who exactly understands the price of iron ore in the next two years. What is more doubtful is whether the data filled into the iron ore index is true and accurate, and whether the iron ore market will repeat the mistakes of Libor in the 2008 banking market.

The current situation is a bit difficult for investors and requires comprehensive investigations and in-depth studies, but it is even more of a headache for miners and banks that are planning new mining projects.