China has launched a rival online iron ore trading platform it hopes will allow it to weaken the monopoly of Rio Tinto and BHP Billiton.
The move is the latest in a series of negotiations by China to soften high commodity prices.
The China Beijing International Mining Exchange and China Iron & Steel Association launched the platform yesterday, which will rival the GlobalOre system currently backed by the miners.
While BHP told Fairfax Media the new platform was transparent and proper, the company also voiced support for the rival GlobalOre model.
According to Fairfax Media twenty six major Chinese steel mills and traders have already adopted China’s new system, but few international suppliers are yet to join them.
While producers, buyers, and traders will be allowed to participate in the Beijing-China model, banks and financial institutions will be banned.
Unlike other systems the China backed model will not allow trade in iron ore derivatives such as swaps and futures, a move designed to lower speculation.
China Iron and Steel Association deputy chairman Wang Xiaoqi said the ban would help “better reflect the price based on actual supply and demand”.
Between them BHP Billiton, Rio Tinto, and Vale control three quarters of global iron ore supply, and as the largest customer China has long been pushing to have a bigger say on prices.
Last year the three producers ditched the “benchmark” system where annual prices were agreed upon through negotiations with buyers and sellers.
They switched instead to a system that adjusted prices every three months, which many Chinese buyers suspect is prone to manipulation by financial institutions not interested in buying physical ore.