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.

Nippon Steel Increases Stake In Ferromanganese Producer Nippon Denko

Nippon Steel Corporation has increased its stake in ferroalloy producer Nippon Denko from 9.5 percent to 15 percent. Nippon Denko will become an equity method affiliate of Nippon Steel.

The decision came after the companies' agreed to further strengthen their alliance, in order to enhance their competitive edge and corporate values.

The two companies have maintained a close business relationship through their trade in ferromanganese and the new agreement will enable both companies to stabilise their procurement of raw materials – including manganese ore – for Nippon Denko and to conclude a long-term sales and purchase agreement for ferromanganese produced by Nippon Denko.

Vale Slashes Japan, Korea Iron Ore Benchmark Prices

Brazilian miner Vale on Wednesday said it slashed 2009 benchmark iron ore prices by as much as 48.3 percent to Japanese and South Korean steelmakers as part of annual benchmark price talks.

The company stated in a securities filing it will cut fine ore prices by 28.2 percent from 2008 levels and agreed to reduce pellet prices by 48.3 percent.

Vale, the world's biggest miner of iron ore, said the accord includes Japan's Nippon Steel Corp., South Korea's POSCO and three other Japanese steelmakers.

The move sets the stage for Vale to negotiate this year's benchmark price with China, the world's largest importer of iron ore which is demanding a cut of 40 to 50 percent.

A Vale spokesman declined to comment on the move.

Miners until last year had the upper hand in price negotiations as strong demand let them command hefty increases, the financial crisis turned the tables, giving Asian steelmakers a stronger position to demand steep cuts.

Last month Australia's Rio Tinto, the second largest producer, agreed to reduce fine ore prices by 33 percent from 2008 prices to Japanese buyers and cut higher quality lump ore prices by 45 percent.

Vale this year waited for other producers to announce the new prices they had negotiated before committing to a rate after Australian miners clinched better deals in 2008 based on lower shipping costs.

Source: Reuters

Vale To Press For Smaller Price Cut - Analyst

Vale SA, the world’s biggest iron-ore producer, will seek a smaller cut in contract prices from customers than the 33 percent reduction negotiated today by Rio Tinto Group, mining analysts said.

Vale will seek to lower benchmark prices for iron ore supplied this year to global steel mills by 20 percent to 27.5 percent, Gilberto Cardoso, a Rio de Janeiro-based analyst with Banif Securities, said today in a telephone interview.

Earlier today, Rio Tinto agreed to a 33 percent cut in contract prices for the steelmaking raw material with Japanese steelmakers including Nippon Steel Corp., the first decline in seven years as the global recession slashes demand.

Today’s agreement “will serve as a parameter for Vale to negotiate”, Luciana Leocadio, analyst with Ativa Corretora, said by telephone from Rio de Janeiro.

Vale press spokesman Fernando Thompson declined to comment on iron-ore pricing in an e-mail today.

Last year, Vale gained a 65 percent price increase while Rio Tinto and BHP Billiton Ltd. which settled prices later in the year after demand surged, won increases of 85 percent or more.

Source: Bloomberg

Rio Agrees 33 Per Cent Price Cut With Nippon Steel

Rio Tinto Group, the world’s second- largest iron ore exporter, has agreed to a 33 percent cut in contract prices with Japanese steelmakers, the first decline in seven years as the global recession slashes demand.

Nippon Steel Corp., the world’s second-biggest steelmaker, agreed to pay Rio 97 cents a dry metric ton unit for its benchmark product in the year started April 1, London-based Rio said today in a statement. Goldman Sachs JBWere Pty had forecast a 40 percent drop from last year’s record.

Rio’s shares reversed a decline and rival Australian iron- ore exporters surged on optimism the agreement will set a global benchmark for contract prices, which had risen more than fivefold since 1999. Chinese steel mills, the world’s biggest producers, are likely to resist the accord after calling for prices to be as much as halved.

“What looks like a pretty good deal might end up being a bit tougher when they come across the Chinese,” said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. “Historically you could say this is a done deal, when Rio strikes with Nippon, well everyone follows, but I get a feeling maybe the Chinese have got something else in store.”

The price accord is the second-highest on record, according to Bloomberg calculations. “The fines settlement is better than most brokers expectations for a 35 to 40 percent fall,” Marcus Padley, a broker at Paterson Securities Ltd., wrote in his trading newsletter, Marcus Today.

Nippon Steel spokesman Hayato Uchida confirmed an agreement with Rio at the cited prices. JFE Holdings Inc., Japan’s second- biggest steelmaker, agreed to the same prices, according to a spokesman for the company, who declined to be named. Kobe Steel Ltd., Japan’s fourth-largest producer, also reached an agreement for a 33 percent cut, said Ryuichi Nakagami, a company spokesman.

Sumitomo Metal Industries Ltd., Japan’s third-largest steelmaker, also reached agreement with Rio on the same conditions, said Nobuaki Masuda, a spokesman for the company.

Posco, Asia’s third-biggest steelmaker, is still in talks with Rio, Choi Doo Jin, a spokesman for the Pohang, South Korea- based company, said by telephone.

“I can’t comment because we need to study” the accord, said Ding Shouhu, the iron ore price negotiator for Baosteel Group Corp., China’s largest steelmaker. “We haven’t got in touch with Rio for two weeks. Rio hasn’t set a time for the next round of negotiations with us.”

The worst recession since World War II has slashed demand for autos and building materials, cutting profits for steelmakers and ore producers. Spot prices for iron ore into China have dropped 66 percent from their February 2008 record.

The price of iron ore for immediate delivery, including the cost of freight to China, rose 0.8 percent to $67.50 a ton for the week ended May 22, according to Metal Bulletin. The cost of freight from Rio’s Dampier port in Australia to Qingdao port in China rose to $10.75 a ton in the week ended May 15, according to prices from SSY Futures Ltd., a unit of the world’s second- largest shipbroker.

“This settlement is a realistic outcome for both parties, one that reflects the global market for iron ore and the current challenging market conditions facing our customers,” Sam Walsh, Rio’s iron ore unit chief executive, said in the statement.

After taking into account an expected loss on aluminum, iron ore may generate about 85 percent of Rio’s earnings in 2009, JPMorgan Chase & Co. said in a report this month.

Nippon Steel agreed to pay 112 cents per dry metric ton unit for Rio’s premium Pilbara Lump product, 44 percent lower than last year’s contract price, the statement said. Rio last year won an 80 percent gain in fines prices with Asian customers and a 97 percent rise in lump prices.

Vale SA, the world’s biggest iron-ore producer, last week said it was waiting for rival BHP Billiton Ltd., the third- biggest exporter, and Rio to reach an accord before deciding prices for the year. Melbourne-based BHP spokeswoman Kelly Quirke declined to comment on the progress of BHP’s iron ore talks with customers. The stock rose 1.2 percent to A$34.29. BHP has been pushing to scrap the benchmark contracts in favor of an index linked to spot prices.

“The market consensus was a 30 to 40 percent cut,” said Kazuhiro Harada, an analyst at Tokyo-based UFJ Mitsubishi UFJ Securities Co. “The settlement won’t have a big impact on earnings forecast as the rate of the cut is seen to be in line with the companies’ expectation.”

China, the world’s biggest consumer of iron ore, has previously wanted a price cut of between 40 percent and 50 percent. Calls to Shan Shanghua, secretary general of China Iron and Steel Association, weren’t immediately returned.

Source: Bloomberg

Nippon Steel To Pay 67 Per Cent Less For Coking Coal

Nippon Steel Corp., Japan’s largest mill, will pay up to 67 percent less for semi-soft coking coal this fiscal year, two industry executives with knowledge of the deal, have said.

The mill will pay $80 - 85 a metric ton for the coal for the year started April 1, down from $240 a ton a year earlier, said the executives, who declined to be identified as the agreement is confidential. The deal for the Australian coal was reached with Xstrata Plc, the executives said today.

Steelmakers in Asia and Europe are slashing production as a global economic slowdown curbs demand from builders and carmakers. Japan’s steel output dropped by a record 44 percent in February from a year earlier to the lowest in four decades. Nippon Steel last month also won a 57 percent price cut for hard coking coal for this fiscal year and a 63 percent drop for pulverized coking coal, according to industry executives.

“The price cuts for all the varieties of coking coal will have roughly a 10,000 yen ($100) a ton cost benefit per one ton of steel products,” UBS AG analyst Atsushi Yamaguchi said.

Nippon Steel had sought a return to the 2007 price level of $65 a ton for semi-soft coking coal.

Hiroshi Nakashima, a spokesman at Tokyo-based Nippon Steel, said he couldn’t comment on raw material prices. James Rickards, spokesman for Zug, Switzerland-based Xstrata’s Australian coal unit, said the company didn’t comment on price negotiations.

Source: Bloomberg

BMA Accepts Coking Coal Price Cut Of 61 Percent

BHP Billiton Mitsubishi Alliance (BMA), the world's largest exporter of coking coal, has agreed to accept a discount of around 61 percent for the steel-making raw material after talks with Japan's Nippon Steel, Citigroup said in a research report.

BMA has agreed on a price of between $115-$125 a tonne for Japan's fiscal 2009/10 year, compared with the previous year's about $300 a tonne.

The price deal, the first between the Australian miner and a key Japanese steelmaking customer, could set a benchmark for other negotiations for contracts for the April to March Japanese fiscal year.

"We believe this settlement contains no carry-over tonnes, a much discussed sticking point of the negotiations," Citi's analyst Alan Heap said in a research report issued on Thursday.

Citi did not give details on how it knows of the settlement price.

Source: Reuters

Nippon Steel Looking For Ferrochrome At 87c/lb Chromium

Despite previously announcing that it would not be importing any ferrochrome in the first quarter of this year, Nippon Steel & Sumikin Stainless Steel have announced that as a result of the adjustment of existing contracts, the opportunity to purchase high carbon ferrochrome has been discovered and the company is looking to buy at a benchmark CIF price of 87 cents per pound of chromium.

The benchmark price of high carbon ferrochrome settled for shipments in October to December quarter of 2008 was 193 cents per pound of chromium CIF Japan.

As a result of cuts in Japanese steel production ferrochrome shipments from the final quarter of 2008 have largely been stocked at Japanese mills and carried over to production for the January to March quarter. Because of these excessive stocks Nippon Steel & Sumikin Stainless Steel decided to skip new contracts for shipments in this quarter.

However, some Japanese steel companies, producing special steel for the automobile industry, have maintained their production, with the result that they have a requirement to purchase high carbon ferrochrome for shipments in the January to March 2009 quarter.

Source: Steel Guru

Nippon Steels To Pay Less Than Half For Ferrochrome

JMB reports that Nippon Steel & Sumikin Stainless Steel Corporation have agreed with their South African supplier to reduce ferrochrome purchase price by 54.9% for the January to March quarter compared to the October to December quarter.

The firm decided to keep continuity of the price by setting standard for negotiation for April-June period while the firm considered putting off the purchase in January-March when the firm has enough chrome inventory under the major production cut.

Nippon, Posco In Raw Material Alliance

Nippon Steel, the world's second-largest steelmaker, has said it will co-operate with South Korea's Posco about iron ore and coking coal contract prices for this year, although talks have yet to start.

Akio Mimura, the chairman of Nippon Steel, said in Seoul on Saturday that his company already has an alliance with Posco when asked if his company planned to co-operate with the Korean steelmaking giant in its raw material negotiations.

Mr Mimura also stated that Nippon Steel did not plan at present to shut down any of its blast furnaces because of weakening demand.

Rizhao Iron Ore Volume Tops 29Million Tonnes In H1

China Customs statistics shows that Chinese iron ore imports through Rizhao port reached 29.27 million tonne for January to June period, making it the number one port for iron ore imports in terms of volume.

The newly-built 250,000 tonne dock has provided more room for piling up iron ore. At the same time, it has strived to enlarge market share and tonnages have jumped by 19.3% year on year in the first half of 2008.

Rizhao port is now concentrating on the construction of key projects, including the second phase of the iron ore yard, which is expected to be put into force in H2. The new projects are expected to further sharpen its edge over its competitors.

Rizhao's throughput topped 100 million tonnes in 2006 and surged by 19% to 130 million tonne in 2007. It ranks number among sea ports in China.

Source: Steel Guru

BHP Agrees Iron Ore Prices With Japanese Steelmakers

Nippon Steel Corp., the world's second-biggest steelmaker has accepted a record increase in iron ore prices from BHP Billiton Ltd., matching a doubling of prices agreed last month with Rio Tinto Group.

The steelmaker, which in April said higher costs would pare annual profit 41 percent, will pay BHP as much as 97 percent more for ore, Masato Suzuki, a spokesman for the Tokyo-based company said today by phone. JFE Holdings Inc., Japan's second-biggest mill, also accepted the BHP increase, said an official for the company's steelmaking unit, who asked not to be identified.

The BHP contracts, the last to be settled among Asian steelmakers and the world's three biggest suppliers of iron ore, marked the first year in which miners in Australia gained bigger price increases than rivals in Brazil. Nippon Steel and its largest Asian rivals in February agreed to increases of as much as 71 percent from Cia. Vale do Rio Doce, the world's biggest iron-ore producer.

Iron ore prices have gained almost fourfold since 2001 to a record, increasing costs for Japanese steelmakers, which rely exclusively on imported materials. It's the first time the year's initial agreement on ore price wasn't accepted as the benchmark.

Baosteel Group Corp., China's biggest mill, last week accepted an increase of as much as 97 percent for ore from BHP, the world's biggest mining company. This matched an increase won last month from Asian steelmakers by Rio Tinto Group, the world's second-biggest iron-ore supplier.

``We can confirm we have settled with all our Japanese customers,'' Emma Meade, a spokeswoman for Melbourne-based BHP said today. She confirmed the contract price agreements were for the same price as last week's with Baosteel.

Source: Bloomberg