Negotiations with customers still taking place
Global miner Rio Tinto Ltd has announced that it is to move away from annual iron ore pricing contracts and is now negotiating with its customers to supply on quarterly contracts.
Chief executive of iron ore Sam Walsh said in a statement on Friday that the move "is in line with our recent comments that benchmark pricing only works if it reflects market fundamentals, otherwise the system would need to change."
Mr Walsh said that negotiations were still taking place and no further guidance was possible.
The move brings to an end the 40-year system of annual benchmark contract prices between miners and steelmakers. At the end of March RT’s rivals, BHP Billiton and Vale both said they had come to agreements with Japanese and Korean steelmakers to supply iron ore based on quarterly contracts. At the same time they announced price rises of over 90% more than the 2009-10 contract prices.
The move to quarterly contracts for iron ore comes after a similar move by BHP to move to quarterly contracts for coking coal.
Meanwhile magnetite iron ore pellet producer Grange Resources Ltd said on Friday said that it was finalising a quarterly index-based pricing arrangements with its major shareholder and main customer, China's Jiangsu Shagang Group Co Ltd.
Grange said it had secured an interim price increase of 69 per cent for iron ore pellets and expected that the final average price it received in 2010 would be between 80 per cent and 120 per cent higher than 2009 prices.
Commenting on the arrangement Grange chief executive Russell Clark said "Once we have final agreement, the revenue from pellets sales after 1 April 2010 will be backdated to reflect the new arrangements."
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