The end seems to be in sight for the four-decade old system of iron ore benchmark pricing after Baosteel Group, representing China in the iron ore price talks, said that it was reasonable to expect adjustments in the way the commodity is prices.
Baosteel chairman, Xu Lejiang said today in Shanghai that the break with the traditional method of agreeing an annual price has led to tensions between the miners – Rio Tinto, BHP Billiton and Vale – and the steelmakers led by Baosteel.
“The contract pricing system needs improvement, and some adjustments are reasonable,” he said. “There’s still an iron ore supply shortage now,” Mr Xu added, “but the situation will turn around.”
Vale, the Brazilian miner which is the largest iron ore exporter, is seeking shorter-term contracts that could boost prices by between 90 percent and 110 percent, and wants to price iron ore on a quarterly basis in talks with customers. Meanwhile Sam Walsh, the head of iron ore at second largest miner, Rio Tinto said yesterday that “the customers are well and truly aware of the pressure on annual prices. The system is broken.” The third largest miner, BHP Billiton, wants to move to index-based pricing.
Traditionally, prices were set annually from 1 April each year.
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