A new era of global iron ore pricing? (3)
Rising iron ore price would not only hurt the steel industry, but also affect the whole industrial sector, said Shi Chenyu, senior researcher at the investment department of Industrial and Commercial Bank of China.
"A more serious consequence is the new pricing system is likely to fuel speculative trading of iron ore, which would make more price volatility inevitable," said Zhang.
However, Zhang said the change would help avoid similar experience in 2008 when Chinese steel industry suffered overall losses after iron ore spot prices fell sharply because of the global financial crisis.
Since China joined the iron ore price negotiation in 2003, prices have been rising as suppliers bet on the growth in China's huge demand. In 2000, China accounted for just 16 percent of the sea-borne iron ore market, which surged to 68 percent last year.
Spot prices now climb to 166.67 U.S. dollar per tonne, nearly tripled from the same period last year.
Zhang said the Chinese government should further push forward the development of domestic iron ore mines and encourage steel enterprises to increase input in research and development to improve iron ore utilization efficiency.