A worker of HBIS Group Tangsteel Company patrols at the steel coil storage area in Tangshan, north China's Hebei Province, May 31, 2019.Photo:Xinhua

The exchanges between steel bodies from China and Japan signified that global soaring prices of the raw material could be restrained to some extent and a more reasonable pricing mechanism may be established to address strained supply chains, experts have said.

The remarks followed Luo Tiejun, vice president of China Iron and Steel Association (CISA) meeting with the Nippon Steel's China Chief Representative on Tuesday in Beijing. Nippon Steel is the world's No.3 steelmaker.

The two parties held a candid and friendly exchange on issues such as controlling production capacity, raw material prices, regulating iron ore pricing mechanisms, and steel market trends in the second half of the year, according to the website of CISA.

Luo hoped that the two parties will continue to maintain dialogue and exchanges in the future, especially in low-carbon metallurgical technology.

Exchanges and working in partnership on steel and iron ore market between China and Japan are conducive to clamping down on global soaring prices of the raw material and a more reasonable pricing mechanism is one measure which could address under pressure supply chains, Wang Guoqing, research director at the Beijing Lange Steel Information Research Center, told the Global Times on Wednesday.

Compared with Japan, whose firms have invested early and widely on many mining sources in both Australia and Brazil, thus winning more right of speech, China has few say on the iron ore pricing even as a major global buyer of the raw material.

"That's why Chinese steel representatives need to strengthen exchanges with the Japanese side," Wang noted.

In the short-term, Japanese steel companies will undoubtedly pay for the rise in international iron ore prices thus weakening their profits, but because Japan has a large share across the upstream industrial chain, Japanese companies will reap the increase together with Australians and Brazilians, said Wang.

According to the World Bureau of Metal Statistics, Japan imported around 99.44 million tons of iron ore in 2020, decreasing the sixth year in a row. China's imports were nearly tenfold of that, with more than 80 percent sourced from Australia and Brazil.

The latest data from China's customs authority showed that China's imports of iron ore surged in the first five months of this year. A total of 472 million tons of iron ore was imported from January to May, up 6 percent year-on-year. The average price of iron ore spiked to 1,032.8 yuan ($161) per ton, up 62.7 percent.

Several experts told the Global Times that given current China-Australia souring ties, diversifying the sources of supply for much-needed commodities including iron ore has become part of China's long-term strategy to fend off the risks of too much reliance on any single source.

The surge in iron ore prices has raised concerns about market speculation with Chinese officials, who have been ramping up measures to cool the market down.

Chinese steel prices are expected to stabilize as demand softens in the near term and a round of government inspections aims to stop speculation and irregularities, the CISA said at the end of May.

The CISA proposed an industry self-review initiative last month, urging the iron and steel industry to strengthen market order to further promote high-quality development of the industry while vowing steel enterprises will adjust their export strategies to safeguard the domestic supply.

Global Times