On March 31, Jia Yinsong, an official at China's Ministry of Industry and Information Technology (MIIT), stated that China's iron ore market demand is its biggest bargaining chip, in comments made on the quarterly and index pricing systems sought by the three iron ore giants.
Mr. Jia said that the three iron ore miners have been forcing Chinese steelmakers to seek alternative sources of iron ore. From now on, he said, China will raise the output of domestic iron ores and give priority to domestic iron ore mining. "Now we have both the technology and the ability," he stated. Although it will take time for Chinese domestic iron ore to take the place of iron ore imports, Mr. Jia said the time interval required should not be taken advantage of by the three iron ore miners to give up their chance for long-term cooperation with China.
At the China Iron Ore Conference 2010 held on the same day, some investment banks promoted the iron ore swap trade to Chinese steel market players. However, Mr. Jia suggested that Chinese companies should not to participate in this trade. In Jia's opinion, the so-called iron ore swap is a form of financial derivative, whereas financial derivatives played their part in sparking the financial crisis in 2008. Mr. Jia said that, if an index pricing system is adopted, iron ore prices will be pushed up further through market speculation on the iron ore index.