An iron ore mining site in Australia Photo: cnsphotos

 A senior official from the China Iron and Steel Association (CISA) told a senior executive from mining giant Rio Tinto during a video conference on Friday that the current pricing mechanism for iron ore is “unreasonable” and called for a new pricing mechanism, following a recent surge in the price of the key raw material for steelmaking.

“Rio Tinto has recently made continuous high-premium transactions on its platform, and the [price] increase has exceeded companies’ expectations. The existing pricing mechanism is unreasonable,” Luo Tiejun, vice president of the association, said in the meeting with Simon Farry, vice president of sales and marketing for Rio Tinto's iron ore business.

Luo further stated that buyers and suppliers should study and establish a new pricing mechanism to replace the current one that is not conducive to the long-term development of upstream and downstream sectors, according to a statement posted on the association’s website.

Rio Tinto said that demand for iron ore has been strong and it was understandable that volatile market have brought challenges to end users, adding that it was willing to work with buyers to optimize and improve the current pricing mechanism, according to the statement in Chinese.

Iron ore prices have surged sharply in recent weeks, reaching an eight-year high of $145 per ton on December 4 after a 50 percent-increase from early this year, prompting the CISA to call for intervention from regulators into possible market manipulation. That trend has continued, with iron ore futures surging almost 10 percent to an all-time high of about $152.95 per ton market for the first time.

In a panel discussion hosted by the CISA on Friday, major Chinese steelmakers concluded that the price surge deviated from market supply and demand fundamentals and there was an “obvious sign” of speculation, calling for regulators to investigate and seriously crackdown on illegal activities. 

The recent surge in iron ore prices may have also been caused by supply concerns after storms hitting Western Australia – the biggest iron ore producer and exporter in the world, according to media reports. 

Global Times