China's Imported Iron Ore Supply Security Research Under The Post-longterm-agreement Era

With the accelerating progress of urbanization and continuously rapid development of national economy, steel industry, as a basic industry, has, these years, not only strongly supported our national economic construction and also stimulated huge demand of iron ore which is used as a kind of raw material. We can only depend on importation as a result of insufficient domestic iron resource which could not meet the demand of steel industry efficiently. We China have become the so called"Oriental Engine"after the financial crisis. And this leads to a higher demand of iron importation. But these years witnessed irrational rise of iron import prices in the international oligopoly market.However, international iron import price mechanism has changed a lot in the year 2010. The long-term agreement pricing mechanism, which was under the annual pricing system, has ended with the rise of quarterly ones carried out by Companhia Vale do Rio Doce and monthly ones forwarded by Broken Hill Proprietary Billiton Ltd. The era of iron ore financialization is coming marked by the first iron ore futures contract launched by India Futures Exchange. We China had to passively accept the irrational increase of iron ore all the time as the biggest iron ore importer and consumer. Faced with the new situation, our national iron ore import condition is far from being satisfactory.Iron ore financialization is an inevitable development tendency, while the new pricing mechanism is a transition period in this tendency. The main research line is as follows. Firstly, starting from definition of basic concepts and theoretical analysis, we define the post-long-term-agreement era and the iron ore price security concepts. At the same time, we compare and analyze the two iron ore price mechanisms. Secondly, after plentiful of data cleaning and statistic analysis, we define the nature of security of iron ore supply and put forward this idea from the iron ore supply and demand visual.And then, what is one of the most obvious innovations is that we quantitatively analyze the possible problems of supply and demand security by establishing security factors of iron ore supply. We analyze these problems overall from two perspectives, supply and demand price security as well as supply and demand stability. We believe the following four factors are responsible for causing these problems. The four are firstly iron ore FOB price, secondly ocean shipping charges, thirdly the new price model and fourthly the rivalry against Jpan. Based on analyzing the factors causing supply and demand security, using the method of linear regression from econometrics, we forecast the output of our raw steel and domestic iron ore and thereby we forecast the demand of our iron ore importation. On these accounts, we draw a conclusion that we are confronted with a tough security situation of iron ore supply and demand.We use the our national idea of establishing oil future market for reference to solve these problems. With price discovery and risk averse of future market, and with the current situation of international iron financialization , we can forecast that the iron ore future market must be one of the inevitable products of this tendency and it is bond to become a main method to settle security problems of iron ore supply. Therefore, we'd better establish our national iron ore future market to avoid these problems and make suggestion from government functions, enterprise personal developing and financial institutions'support, these three aspects, which is expected to bring advisory opinions for our iron ore future market.