By staff reporter Zhang Boling

(Caijing.com.cn) The establishment of iron ore trading centers violates the central government's steel industry support plan by introducing speculation to the market and destabilizing pricing mechanisms, the China Iron & Steel Association said.

Issued on June 9, the association's statement was directed against China's first iron ore trading center launched on May 25 in Rizhao, in eastern China's Shandong province. 

Rizhao International Iron Ore Trading Center, with registered capital of 20 million yuan, includes among its major investors Shandong Wanbao Group, Shandong Huaxin Industry & Commerce Company and Rizhao Zhongrui Group.
 
The three are local iron ore trading companies each with a 30 percent stake in the center. Two other companies hold the remaining 10 percent.

In its statement, the China Iron & Steel Association requested that the government immediately cancel the approval of such trading centers.

Shan Shanghua, secretary-general of the association, told Caijing that such trading centers will introduce speculation on imported iron ore prices and damage the market.

However, Rizhao Iron Ore Trading Center's general manager Bai Wenhui told Caijing that the center will operate in accordance with China's laws and industry policies.

Under Chinese regulations, iron ore importers must sign contracts with steelmakers to confirm the imported amounts and the purpose of such imports. The government also monitors enterprises' iron ore flow to prevent speculation.

In 2005 China cut the number of licensed iron ore importers to 112 from more than 500 previously.

Still, a number of licensed importers continue to buy up imported iron ore when prices are low and resell to steelmakers without import licenses and traders when prices are high. 

1 yuan = 14 U.S.cents

Full article in Chinese: http://www.caijing.com.cn/2009-06-10/110182288.html