Vale, BHP End Annual Iron Ore Talks

Iron Ore Benchmark Pricing On Verge Of Being Consigned To History

Vale SA, and BHP Billiton Ltd. have announced that they have signed a number of short-term contracts with Asian steel mills, with Vale gaining a 90 percent increase in its prices.

Sumitomo Metal Industries Co., has agreed to pay Vale $100 to $110 a metric ton for the quarter starting April 1, spokesman Toshifumi Matsui said on Tuesday, adding that the pact is a tentative agreement.

Nippon Steel Corp., Japan’s largest steelmaker, has also reached a “tentative” price agreement for the April quarter, the company’s President Shoji Muneoka said today in Tokyo without providing pricing details. However, he added that his company still believes that annual benchmark prices are desirable and that his company would be contacting domestic customers about the change to quarterly pricing.

BHP, the largest mining company, today said it will sell the majority of its production to Asian steel mills on shorter-term contracts. The company gave no details of its pricing.

The pricing details mark a break with the 40-year old system of setting a benchmark price. “Details of the agreements with our customers are subject to confidentiality agreements,” said BHP spokesman Amanda Buckley. Ms Buckley declined to comment either on the price agreed or the names of the customers that had agreed those prices.

Pedro Gutemberg, director for marketing and research at Vale, said in Beijing today that his company wanted a new pricing system to improve pricing flexibility, predictability and transparency. Mr Gutenberg didn’t confirm the price agreement with Sumitomo Metal.

“For us, the benchmark system is old, so we decided to go this route,” he added.

Chinese steelmakers are said to be still in talks with the iron ore producers over pricing issues.