Vale SA, the world’s biggest iron-ore producer, isn’t negotiating annual contract prices with steelmakers and is selling on the spot market, said Jose Carlos Martins, the company’s executive director.
“Vale can quite easily survive on spot-market sales,” he said in a telephone interview today from Angra dos Reis, Brazil. Vale, which in recent years has sold almost exclusively through contracts, confirmed the spot sales for the first time.
The company posted a 65 percent increase last year on so- called benchmark prices for the steelmaking material, though Australian rivals BHP Billiton Ltd. and Rio Tinto Plc settled months later after demand surged and got an 85 percent increase. Chinese and Japanese steelmakers now want price reductions of as much as 40 percent as demand slumps during the global credit crisis.
Vale, which is based in Rio de Janeiro, has yet to have negotiations with the steelmakers who buy the raw material in annual contracts, as it waits for BHP Billiton and Rio Tinto to come to price terms with the steel companies first.
Vale chose to pass on talks, he said, “because of last year’s problems when BHP Billiton and Rio Tinto didn’t follow us. We won’t be cornered again.”
Martins said today he didn’t know if Vale will reach an agreement with steelmakers on prices for annual supplies of iron ore.
A settlement will occur between Australian miners and Asian buyers before the end of June, when Vale will review the situation, he said.
China spot market prices for iron-ore fines rose 0.75 percent yesterday to $67.50 a metric ton, according to London- based publication Metal Bulletin. That’s a 30 percent discount to last year’s record contract price for Rio’s benchmark ore of about $91 a ton.
Source: Bloomberg
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