China has opened the doors to an international iron ore trading centre in the Shandong province which is set to pave the way for an iron ore price index.
The Rizhao International Iron Ore Trade Centre will provide an exchange point for steelmakers and producers and provide trading information, storage, transportation and insurance services.
Shandong Huaxin Trading executive Bai Wenhui said the centre will promote orderly iron ore imports and standardise activities of trading partners.
“It will also gradually facilitate China to launch its own iron ore price index,” he said.
Australia’s iron ore exports are currently determined by a benchmark iron ore pricing system that locks in a huge portion of Australia’s export revenue each year.
However, BHP CEO Marius Kloppers recently declared the system “practically dead” because mining companies generally negotiate prices at annual talks with Asian steelmakers.
Experts claim lengthy negotiations and the growing spot market breaks down the traditional benchmark system and causes uncertainty in the market.
A BHP spokesperson told MINING DAILY the company is supporting developments to improve the pricing system and create a more transparent structure.
BHP has also said it will not sign any new iron ore buyers based on long- term prices.