Research On The China Factor In Global Iron Ore Pricing Mechanism

Since2003, China has become leading iron ore consuming country in the world. However, China Demand has not brought China any positive effect in the Iron ore bargaining process. Instead, those iron ore producers like CVRD, Rio Tinto and BHP Billiton dominate pricing power and successfully transferred global iron ore pricing mechanism from yearly bargaining mechanism into index pricing mechanism. This phenomenon attracts public attention of China and triggers fierce debate.Using international political economy theory, this paper mainly analyzes how the global iron ore pricing mechanism changed and further analyzes what influences this process. Chinese demand greatly changed the structure of iron ore market, from duo-oligarchs to unilateral oligarchs, which greatly reduces bargaining power of China side. Although on the most case, it’s the result of interaction of multi-national companies, Mother country also plays a great role in the pricing process. Actually, Susan Strange offers us a theory of structure power which can shed some light on this complex problem. Pricing power on iron ore area is the result of structure power based on production, finance, transportation and knowledge structure. All the source of these problems is Chinese development model. Based on these findings above, a package of solutions has been developed to gain pricing power of iron ore.The whole paper analyzes Chinese factors in iron ore pricing mechanism, and provides a package of suggestions to Chinese government on iron ore issues and other bulk goods issues similarly. In order to change the disadvantaged situation now, China should develop its potentials based on transportation, production, finance and knowledge structures, and what’s more, should change the China development model to more efficient type.