The China Iron and Steel Association is drawing up measures to reduce the number of traders allowed to import iron ore, an industry source said on Friday. "CISA is currently discussing the measures with the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters (CCCMC) and details will emerge later," a source at CCCMC said.
CISA will also implement an "agent system" aimed at making sure that import volumes are in accordance with the actual needs of steel mills and preventing traders from engaging in reselling. A new "auditing system" will also allow ports to refuse entry for low-quality imported ores.
At the Friday meeting, CISA chairman Shan Shanghua urged licensed importers to boycott the big three iron ore miners in the next two months in order to fight back against their "monopoly behaviour", according to a report by the 21st Century Business Herald. He said that China's domestic ore production would be enough to keep China's mills running for two months, and port stockpiles could also be used.
According to the China Securities Journal, the association plans to tear up the import licenses of trading companies that imported less than 1 million tonnes of iron ore in 2009. An inspection of stockpiles building up at major Chinese ports got underway earlier this month to check quality and ascertain which traders were buying merely to speculate on soaring prices.
After its long struggle to impose "discipline" on China's wayward iron and steel sector last year, it remains unclear how CISA will enforce the new measures, which are described as "sectoral" and therefore unlikely to involve the government. CISA, which was not immediately available to comment, has previously blamed small traders for undermining its position in benchmark price talks with foreign miners last year.
It claims their imports of vast quantities of ore made it difficult for the association to improve China's position during the negotiations and persuade Rio Tinto, BHP Billiton and Vale to give a favourable price to Chinese customers. Since last year, CISA has vowed to substantially reduce the number of licensed importers and impose strict "guidance prices" for iron ore, but it has not had the clout to implement its plans. A trader based in east China's Zhejiang province said even if they were fully implemented, the new measures were unlikely to have much of an impact on the market.