CHANGING DYNAMICS OF IRON ORE TRADING

The world of Iron Ore market is witnessing a continuous change. The evolution of the iron ore market is primarily being driven by its largest consumer i.e. Chinese steel industry. Global iron ore market has been witnessing a series of changes in the past few months. These changes are a reflection of the changes in the steel industry, which is ultra-sensitive to global economic activity. The eternal struggle between the steel mills and the iron ore producers for obtaining a better pricing leverage has also contributed to these changing dynamics. Change in Pricing System It all began with the so called ï¾Ãƒâ€šÃ‚Æ’??big threeï¾Ãƒâ€šÃ‚Æ’?ï¾Ãƒâ€šÃ‚ of global iron ore market viz. Vale, Rio Tinto and BHP Billiton moving to monthly pricing from the quarterly pricing system in order to better reflect the volatility in the iron ore prices. The ï¾Ãƒâ€šÃ‚Æ’??big threeï¾Ãƒâ€šÃ‚Æ’?ï¾Ãƒâ€šÃ‚ together account for more than 60% of global iron ore market. It should be noted that the now obsolete quarterly system itself replaced an annual pricing system only a few years back. Chinese steel industry being the largest consumer of iron ore is starting to play a more significant role in the global iron ore market. The shorter term iron ore contracts was preferred by the Chinese steel mills ( the largest consumer of iron ore) as it gave them huge cost benefits when the spot prices weakened.

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