Rio Tinto, the world's second-largest iron ore miner, is still in talks with Chinese steel mills over benchmark iron ore prices, a company spokesman said on Monday, the eve of a deadline for agreement.
Iron ore miners and their Chinese customers have until Tuesday to reach a pact on annual iron ore contract prices.
"We are officially still in negotiations," the spokesman told Reuters.
Spot prices delivered in China have already risen around 25 percent this month to a four-month high above $80 a tonne, around $5 in the last week.
Spot prices are now trading at $US12 to $US15 a tonne over benchmark prices already set separately with Japanese and South Korean steel mills, which recently agreed a 33 per cent price cut.
The higher spot price could be encouraging producers to take a harder line with Chinese steel mills, which are holding out for a minimum price cut of 40 to 45 per cent.
Rio Tinto and world No. 3 iron ore miner BHP Billiton have argued against a benchmark price set below the spot level, saying it is unfair to producers and fails to accurately reflect market demand.
If the miners and Chinese mills reach a deal by Tuesday, the contract price would be backdated to April 1 and run until March 31, 2010.
BHP Billiton declined to comment on the state of play.
"We could see a lot more emphasis on the spot market next week," said DJ Carmichael & Co mining analyst James Wilson.
"That translates into volatility and that will be a positive for the price."
The Australians want the mills to agree to a 33 per cent price cut over last year, in line with benchmarks already set with Japan's Nippon Steel and JFE and Posco of South Korea or buy ore on the spot market.
Source: Reuters, WA Today
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