There are indications that the shift in the pricing model for iron ore should only be a matter of time.
From beginning to end, I firmly believe that neither industry associations (such as the China Steel Association) nor the steel mills should, and there is no reason to resist too much. Instead, we should treat this incident with a tolerant attitude, see positive factors, and use our own efforts to adapt to this change.
For iron and steel enterprises, after the change in the pricing mode of iron ore, steel companies can use ** to sell products on the one hand, and lock raw materials costs through iron ore swaps or other financial tools on the other, and lock freight rates through the freight index to achieve The effect of hedging. In the long run, the market will also see arbitrage between iron ore, freight, steelmaking energy, and finished goods, just like soybean crushing arbitrage. Iron and steel companies with solid goods trading and processing bases, as long as they use these tools, may well Get excess profits.
Iron ore Swap, or other iron ore related financial products have become the final benchmark pricing model I think there will be a long way to go (for example, three years, or five years), and now OTC There are many imperfections in the market swap products. Since there is still a long way to go, we have given us some time to adapt to the changes in the market. In the past few years, we have done too many things on whether we should maintain the long-term agreement price model, wasting too much time, I do not think this is the right direction.
At this stage, we should focus on the following things:
First, China should pay close attention to research on iron ore products, at least to promote the formation of iron ore long-term on-floor trading, or to improve the OTC off-market market clearing services, and focus on liquidating this product. This is China Steel Association and What we should promote now is also the future competition at the national level and the basis for establishing pricing rights.
Second, Chinese iron and steel enterprises should seize the time and make a fuss about the entire industry chain. In the future, the earnings of the ore will become extremely unstable, but the profits from processing and hedging will become more stable. Therefore, steel mills must learn to use financial tools to protect enterprises. The financial statements, and learn to earn steady gains, avoid excessive speculation.
Third, China's financial industry should enter the iron ore swap market as soon as possible. As far as I know, several large Chinese-funded commercial banks have been carrying out long-term preparations. At present, domestic commercial banks have a large business in the field of iron and steel enterprises' commodities. The launch of iron ore swaps will effectively reduce commercial bank risk to steel companies and increase corporate mortgage rates. .
The fourth is to cultivate talent as soon as possible.
We have seen that commodities, such as grain, energy, and basic metals, have become financialized, and freight related to bulk commodities has been financialized. From the stage of stage, each type of product will mature from the brewing and financialization to maturity. 10 years. After the long iron ore association was broken, his financialization had already passed the brewing stage and he began to transition from the beginning to the mature stage. Eventually, the pricing of iron ore will also be financialized like other commodities.
From beginning to end, I firmly believe that neither industry associations (such as the China Steel Association) nor the steel mills should, and there is no reason to resist too much. Instead, we should treat this incident with a tolerant attitude, see positive factors, and use our own efforts to adapt to this change.
For iron and steel enterprises, after the change in the pricing mode of iron ore, steel companies can use ** to sell products on the one hand, and lock raw materials costs through iron ore swaps or other financial tools on the other, and lock freight rates through the freight index to achieve The effect of hedging. In the long run, the market will also see arbitrage between iron ore, freight, steelmaking energy, and finished goods, just like soybean crushing arbitrage. Iron and steel companies with solid goods trading and processing bases, as long as they use these tools, may well Get excess profits.
Iron ore Swap, or other iron ore related financial products have become the final benchmark pricing model I think there will be a long way to go (for example, three years, or five years), and now OTC There are many imperfections in the market swap products. Since there is still a long way to go, we have given us some time to adapt to the changes in the market. In the past few years, we have done too many things on whether we should maintain the long-term agreement price model, wasting too much time, I do not think this is the right direction.
At this stage, we should focus on the following things:
First, China should pay close attention to research on iron ore products, at least to promote the formation of iron ore long-term on-floor trading, or to improve the OTC off-market market clearing services, and focus on liquidating this product. This is China Steel Association and What we should promote now is also the future competition at the national level and the basis for establishing pricing rights.
Second, Chinese iron and steel enterprises should seize the time and make a fuss about the entire industry chain. In the future, the earnings of the ore will become extremely unstable, but the profits from processing and hedging will become more stable. Therefore, steel mills must learn to use financial tools to protect enterprises. The financial statements, and learn to earn steady gains, avoid excessive speculation.
Third, China's financial industry should enter the iron ore swap market as soon as possible. As far as I know, several large Chinese-funded commercial banks have been carrying out long-term preparations. At present, domestic commercial banks have a large business in the field of iron and steel enterprises' commodities. The launch of iron ore swaps will effectively reduce commercial bank risk to steel companies and increase corporate mortgage rates. .
The fourth is to cultivate talent as soon as possible.
We have seen that commodities, such as grain, energy, and basic metals, have become financialized, and freight related to bulk commodities has been financialized. From the stage of stage, each type of product will mature from the brewing and financialization to maturity. 10 years. After the long iron ore association was broken, his financialization had already passed the brewing stage and he began to transition from the beginning to the mature stage. Eventually, the pricing of iron ore will also be financialized like other commodities.