Increase in prices of mineral products companies do not need to seek the right to avoid risks

Since the beginning of this year, the prices of major mineral products in China have risen, and the prices of international mineral products have also experienced major shocks. Since most Chinese companies can only passively accept prices, corporate operations face great risks, and there is an urgent need to increase pricing discourse.

The author learned from the 2010 China International Mining Conference that the demand for mineral products in the world continues to grow. Some countries continued to implement the policy of stimulating economic recovery and the demand for large mineral products rebounded strongly. For example, OPEC once again raised global oil demand expectations last month. It is expected that world steel demand will increase by more than 10% this year, copper demand will increase by 8%-9%, and aluminum demand will increase by 10%-12%.

Representatives attending the mining conference pointed out that due to the large demand for minerals, abundant liquidity in the capital market, and scarcity of resources, it is expected that the prices of international mineral products will continue to fluctuate at a high level for a period of time.

"Over the past two years, in order to deal with the serious impact of the international financial crisis, the Chinese government has fully implemented a package plan and has taken the lead in achieving economic recovery in the world. Since the second quarter of 2009, China's mineral market has become increasingly active. The stabilization of the economy and the sustained rapid growth have made important contributions to the development of the global mining industry and brought about positive effects.” Wang Min, Deputy Minister of Ministry of Land and Resources and Director of China Geological Survey Bureau stated at the 2010 China International Mining Conference.

At the same time, however, the prices of major mineral products in China continue to rise. From January to September this year, the average spot price of crude oil in Daqing Oilfield was US$76.1/barrel, an increase of 37.8% year-on-year; the average price of high-quality coal was approximately RMB700/ton, an increase of 28%; the average price of iron ore was relatively stable at 1200. RMB/ton is up and down, an increase of 49%; average copper price is RMB 57,200/ton, an increase of 47.0%.

The figures show that from January to September this year, the growth rate of China's important solid mineral products exceeds double digits, and continues to rank among the top in the world. Among them, the raw coal output was 2.442 billion tons, a year-on-year increase of 17.2%, and the output of iron ore was 780 million tons, a year-on-year increase of 25.9%. China is the world's largest consumer of iron ore. In 2009, it imported 627.7792 million tons, an increase of 18.41218 million tons or 41.5% over the same period of last year.

Even if it is a big commodity producer and a big consumer country, it does not mean that China has the dominance in the pricing process. On the contrary, since the beginning of the 21st century, the international commodity market has gradually emerged the “strange phenomenon of what China is buying and the international market is up.” The frequency of asset prices, especially the prices of mining products, has been increasing at a faster rate and the volatility has increased. Uncertainties increase indefinitely. Wang Hongying, vice president of the mid-term research institute, stated at the 2010 China International Mining Conference.

Deng Xiangrong, professor of economics at Nankai University, said that at present, China has become the largest buyer of many international commodities, but due to lagging market construction, it is in a weak position in the world pricing system, leading Chinese companies to always passively accept the leading countries in Europe and the United States. Market prices are subject to increasing risks of price fluctuations, which have a serious impact on the steady and sustainable development of the national economy. This situation is urgently needed to be changed by Chinese companies seeking more price discourse power.

In the global market, as iron ore is mainly monopolized by the giants of the three giants, there have been a few large suppliers that correspond to the situation of thousands of companies. Steel companies are difficult to get together and have weak negotiation capabilities. Vendors occupy a large number of negotiations. Initiative. Yan Yaling, director of the China Investment Research Institute, said in an interview with the author that industrial fragmentation is not conducive to Chinese companies competing for price discourse, and should actively guide the macro.

According to statistics, Vale, Rio Tinto and BHP Billiton's iron ore production accounts for nearly 70% of the world's iron ore ocean freight. “In the face of the status quo of upstream industries, the integration of mining companies is the right direction, but attention should be paid to the fairness issues arising in this process.” Wang Hongying analyzed that the collision between market-based pricing mechanism and industry integration will create certain risks, and enterprises should Increase rational thinking.

“In addition, companies must overcome the risks caused by fluctuations in commodity prices, but also to raise the measures to the financial level, the use of financial instruments that are closer to the development of the industry, through hedging financial instruments to control risk,” Tan Yaling said. Wang Hongying also stated that Chinese companies have a serious shortage of financial tools. Now, the healthy development of the financial market provides companies with tools to avoid risks and can help companies to lock in the entire asset quality.

According to the author's interview, there are two main pricing models in international trade. One is the “agreement” price between buyers and sellers, such as iron ore, and the other is based on **market prices. In Tianjin, the country that bears the burden of China's "finance reform first," the Bohai Commodity Exchange is exploring the pricing of commodities in China through the world's first "continuous spot trading" model and sending the "Chinese voice" to the world market.

Since the opening of business on December 18 last year, the daily trading volume of the exchange has grown rapidly. The prices of commodities such as crude oil, coke, and hot coil that have been successfully listed are in line with the spot market, and have attracted the attention of market participants and analysts. . According to reports, the Future Exchange will continue to introduce standard spot trading products that are in line with national strategic interests and meet domestic and international market demands.

Representatives attending the China International Mining Conference proposed that huge economic aggregates have made it possible for China to become the world’s center for commodity price formation. However, at this stage, China's trading organizations still have to work hard to provide services for traders and allow as many participants as possible to buy and sell commodities. We must rely on various forces to spread prices and allow manufacturers and investors around the world to see prices and use prices.