New Chinese iron ore trading platform debuts tomorrow

The new China Beijing Metals Exchange (CBMX), the country’s first physical iron ore trading platform is set to debut Tuesday, with the major producers of the commodity BHP Billiton (NYSE:RIO), Vale (NYSE:VALE), Rio Tinto (NYSE:RIO) as members.

Combined BHP, Vale and Rio Tinto control nearly 70% of the 1 billion tonne annual iron ore seaborne trade.

The timing, according to Reuters, seems perfect, as most of the iron ore sold to China is currently based on spot prices, with the industry developing rapidly.

But some concerns do exist as the exchange will be located in Beijing and international analysts fear it may fall under the influence of the Chinese government.

Xu Xiang Chun, a local commodities expert, disagrees. He told The Sydney Morning Herald usual market forces should predominate:

”The fact that the trading platform is based in China is a positive development on influencing the iron ore price. However, the price is still fundamentally determined by supply and demand,” he said.

”The effectiveness of the platform is dependent on members’ involvement and how much ore they are willing to trade on the platform.”

The Beijing platform is backed by 26 Chinese steel mills and traders, including Baosteel, Wuhan Iron and Steel, China Minmetals and Sinosteel.


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