"Iron ore prices should follow steel prices, not the other way round," Shan Shanghua, secretary general of the China Iron and Steel Association (CISA), stated at a conference in the Chinese port of Dalian on Tuesday, September 28.
"I view iron ore as an intermediate ingredient that only has value because it is processed into steel by the steel industry," Mr. Shan said.
In 2009 China has produced almost half of the world's steel ouput, and so using steel prices to guide iron ore prices would give the country a great deal of control over the cost of the raw material globally. However, such a strong switch in pricing power would be unlikely to be accepted by the big three global miners - Vale, Rio Tinto and BHP Billiton.
Mr. Shan said iron ore pricing indexes reflected only the small share of the iron ore trade taking place via the spot markets and thus should not be the determining factor in seaborne iron ore prices. "Spot trading is mostly by small mills and thus does is not representative of the market," he said.