* Chinese iron ore trading platform will be owned by traders
* Platform given go-ahead four years after first started
* Trading will initially be carried out in yuan
By Ruby Lian and Fayen Wong
SHANGHAI, July 8 China's first non-official
physical iron ore trading platform will begin operations on
Tuesday, four years after it was shut down, in a further sign
that the government is relaxing its tight grip over imports of
the raw material.
China, which buys around two-thirds of global seaborne iron
ore, already scrapped a decade-old iron ore import licensing
system at the start of this month, eliminating middlemen and
cutting costs for domestic steel mills.
The moves appear to mark the end of years of attempts by
China to strictly regulate the iron ore trade due to worry over
its growing dependence on imports, and are in line with efforts
by Beijing to reduce government interference in the market.
The new platform, which will operate out of the coastal city
of Rizhao, will be launched on Tuesday, shareholders and traders
It will be the third new platform to start in just over a
year to help market participants hedge increasingly volatile
iron ore prices, although trading on the existing China Beijing
International Mining Exchange (CBMX) and Singapore-based
globalORE has been fairly light.
The Rizhao platform was first set up by large privately
owned traders in 2009, but was closed by the China Iron & Steel
Association industry body before it started operation due to
concerns that it would introduce speculation and destabilise the
"benchmark" mechanism then used to set annual iron ore prices.
Prospects for the platform were boosted in January when a
state-owned company, China Railway Materials Group Co. Ltd, a
large iron ore and steel trader, took a major stake.
Trades will initially be settled mainly in yuan, helping
traders to sell their inventories sitting at ports, sources with
direct knowledge of the situation said.
"We will sell our cargoes via the platform as the main
shareholder," a senior executive with a trading subsidiary of
China Railway Materials Group told Reuters.
"This will allow everyone to have easier access to materials
and the opening-up of the import market will be a major trend,"
The executive said it was still too early to predict the
Some traders that Reuters spoke to said they wanted to
become familiar with the new platform's trading rules before
deciding whether or not to take part.
"Logistically, the platform should be able to attract a lot
of business since Rizhao is a major iron ore port," said Helen
Lau, analyst for metals and mining at UOB-Kay Hian Securities in
"This makes pricing more transparent for iron ore in China
and if backed by liquidity should boost price discovery in the
Trading on iron ore platforms has so far been relatively
small. Since its launch in May last year, the CBMX had hosted
14.65 million tonnes of trade by last week, according to data
from the exchange.
GlobalORE, which was launched at the same time, has traded a
total of nearly 14 million tonnes, traders said.
About 1 billion tonnes of seaborne ore is traded globally
each year, and China imported about 744 million tonnes last
year, with pricing now determined by benchmarks produced by
Platts, Metal Bulletin and the Steel Index, who collect
information on deals from market participants.
From a peak of nearly $200 a tonne in February 2011, iron
ore .IO62-CNI=SI hit a three-year low of $86.70 last
September. Now at just above $120, the price is on track to end
down for a second year in three.
(Additional reporting by Manolo Serapio Jr in Singapore;
Editing by Richard Pullin)