China to scrap iron-ore import licenses after battles with miners
Move may mark end to effort to wrest pricing power away from big miners like Vale, Rio Tinto
Reuters in Shanghai
China planned to scrap a decade-old iron-ore import licensing system this year, an industry source with direct knowledge of the matter said, opening-up an import market that takes two-thirds of the world's international iron-ore trade.
The move could also cut costs for domestic steel mills by eliminating licensed middlemen charging commissions for imports.
It could also mark the end of years of efforts by China, alarmed by its growing dependence on imports and the dominant role played by the likes of Rio Tinto and Vale, to wrest pricing power away from the big miners by strictly regulating trade.
"China will open up its iron-ore trade from the second half of the year," said the source, who declined to be named as he was not authorised to speak to the media. "Import qualification licences will no longer be required, in order to make the industry more market-oriented and give steel mills more choice."
China imported a record 743 million tonnes of the commodity in 2012, up 8 per cent from the prior year.
Following the move, iron-ore traders will only require the same routine licences issued to other importers - a more streamlined process - and will no longer need approval by government-backed industry bodies like the China Iron and Steel Association (CISA).
The old licensing system was part of China's efforts to make the iron-ore industry speak with "one voice" when dealing with major foreign suppliers. The system was also aimed at stamping out unlicensed traders who were blamed for driving up prices through speculative buying. The campaign proved counterproductive, instead creating a grey market for middlemen to rent out their permits.
CISA and the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters, a unit that helps regulate iron-ore trade on behalf of the Ministry of Commerce, worked together to issue licences to importers.
"Some traders that held licences made a huge profit by selling imported iron ore to those unlicensed buyers over the past few years and the move means that they might lose the advantage," said an iron-ore trader in Shanghai.
China has been trying to reduce government interference in the workings of the market, with its new leaders seeking also to streamline approval procedures.