Research On The Influence Factors Of China’s Iron Ore Import Price Under The New Pricing Mechanism

As a relatively cheap metal resource, iron ore is the basic raw materials in modernindustrial system, and it has an irreplaceable important role in the modernization.Although China has abundant iron ore resources, it is difficult in response to the domestictremendous demand. Therefore, it will be a long-term trend for China to import a greatdeal of resources to meet domestic needs. In this environment, the research on theinfluence factors of China’s iron ore import prices is significance for our response.This paper first analyzes the original pricing mechanism in the international iron oretrade and explore the forming and development of the mechanism. Then, this paperinvestigates the cause of the collapse of the original pricing mechanism, as well as theformation of the new mechanism, and pointes out that the spot price has a core role in thenew pricing mechanism. This study indicates that just because China’s vast andfast-growing demand for raw materials on the international market has broken the balanceof supply and demand which has been relatively stable, so the original pricing mechanismcollapsed because it cannot adapt to the new market circumstances.Since China is the largest importer and consumer of iron ore in the world, under thenew pricing mechanism, the iron ore price on the international market is based on theChina’s spot market. The empirical analysis based on the historical data from January2003to June2011indicates that the domestic steel prices, steel production in China andocean freight of iron ore have a major impact on the import prices, while China’s steelproduction has a significant correlation with the imports and domestic production of ironore and export of steel. Finally, based on the preceding analysis, this paper puts forwardsome policy suggestions about price index, future market, the price of steel, steelproduction, and domestic and foreign iron ore resources exploitation.