Rio Tinto and BHP Billiton, two of the world's biggest miners, have reportedly sought as much as a 95% increase in iron ore prices from Chinese steelmakers. The two companies have asked Chinese steelmakers to accept the largest ever increase in iron ore prices or risk interruption of supplies from Australia, the Financial Times (FT) has reported, citing traders and industry officials.
Separately, Australian securities firm Macquarie says that London-based Rio is committed to securing more than the 71% increase agreed by Brazil's Cia. Vale do Rio Doce (Vale) in February, and greater than the 85-95% estimates that have been bandied about by industry analysts. "Investors should be prepared for an extended and potentially hostile conclusion to the negotiations," Macquarie analysts wrote in a report.
Rio and BHP have warned their Chinese clients some annual contracts will expire next Monday, and they would cease supply under the old terms, the FT says. They have told them that the iron ore would instead be sold into the spot market, where prices are higher, according to the UK paper. It cited analysts as saying that most of Rio's iron ore contracts expire on June 30, but some BHP contracts don't expire until September.
In a related development, Australia may get 12% more from commodity exports than forecast in March because of higher prices driven by Chinese demand for minerals and energy. Sales may rise to a record A$212bn (US$203bn) in the year ending June 30, 2009, the Canberra-based Australian Bureau of Agricultural and Resource Economics said today. That compares with its March forecast of A$189bn and estimated 2008 sales of A$151bn.
Source: Indiainfoline
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