BHP Billiton said on Wednesday its iron ore sales under cheaper spot prices trebled to nearly 30 percent as steel mills deferred long-term contracts and cut output up to half on weaker demand. But BHP kept iron ore output steady -- down just 1 percent last quarter from a year ago -- to take the total in the nine months to end-March to a record 87.4 million tonnes, up 6 percent from a year ago, suggesting the firm is willing to increase market share at the expense of lower prices.
BHP, the world's third largest iron ore miner, said in a statement that it had received requests for deferrals on deliveries for ore sold on long-term contracts and those deferred tonnes had sold on the spot market, raising the portion of sales at cheaper spot prices to 28 percent from less than 10 percent a year ago.
Production figures released on Wednesday show BHP mined 87.367 million tonnes in the first nine months of fiscal 2009.
Fellow Australian miner Rio Tinto Ltd/Plc, which reserved about 15 million tonnes of last year's total production of around 154 million tones for the spot market, would not say if it was being asked to defer shipments.
Global miners are locked in annual talks to settle contract prices of iron ore for the new fiscal year started this month and the issue of iron ore carryover from the prior year remains one of the thorny subjects.
Steelmakers want to cancel the leftover as they were forced to cut output dramatically due to collapsing global steel needs, but miners insist they honour the contract and pay 2008 prices which were agreed at nearly double the level of the year before.
BHP, which has long pushed for the benchmark process to be scrapped, has said it will honour deliveries already contracted under future benchmark prices but would not negotiate new benchmark contracts for as-yet undecided volumes. Instead, it favours an index-type pricing mechanism that takes prevailing spot prices into account.
Prices of Australian iron ore fines were agreed at around $91 a tonne last year, while spot prices are now quoted some 30 percent cheaper at around $64 a tonne.
POSCO said on Wednesday its committed purchase of long-term contract volume would decrease this year due to lower production plan but declined to comment whether it continues to demand deferals of long-term contracts.
The majority of the spot iron ore surplus has been absorbed by China, with the world's top steel producer importing record amounts of ore for the second straight month in March, as medium and small-sized mills raised output, betting the government stimulus plan would lead a demand recovery.
In contrast, iron ore imports by Japan, the world's No.2 importer, dropped nearly 50 percent last month to 5.9 million tonnes, as steelmills in the country, home to the world's top auto maker, cut otuput by the similar level.
Nippon Steel said on Wednesday it would keep its current output cuts into the April-June quarter.
Source: Reuters
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