Iron Ore Contract Prices May Rise 32 Per Cent

Calculation Is Based On Three Months Spot Average

Contract prices of Australian iron ore may rise 32 percent in the July quarter over the previous three months, the Japan Metal Daily newspaper said.


Based on a calculation being put forward by iron ore miners BHP Billiton and Rio Tinto contract prices may rise from around $120 a tonne in the April to June quarter to around $158 a metric ton in the quarter from July to September.


The new amount is apparently derived from the three-month average of the iron ore spot price from March to May on the assumption that the market price stays at its current level until the end of this month.


At $158 a ton, iron ore would cost 2.6 times more than it did in the year ended 31 March.

Surging Iron Ore Prices Boost Profits at Mitsubishi and Mitsui

Surging Iron Ore Prices Boost Profits at Mitsubishi and Mitsui

Surging iron ore prices are likely to boost profits at two of Japan’s largest trading houses.

Both Mitsubishi Corp. and Mitsui & Co., Japan’s two biggest trading houses, are forecasting higher profit this year on the back of increased prices for iron ore and coking coal.

Mitsubishi said on Friday said that net income may climb to 370 billion yen ($3.99 billion) in the year ending March 2011 - up from 273.1 billion yen a year earlier.

Mitsui expects profits of 320 billion yen, up 114 per cent on 149.7 billion yen a year ago.


Mitsubishi has stakes in iron ore mines in Chile and Canada and in a coking coal venture with BHP in Australia. It expects profits from metals to hit 185 billion yen this fiscal year compared to 137.9 billion yen in the year ended March. Earnings from energy are expected to climb to 73 billion – up from 71.9 billion.

Japan's Iron Ore Imports Double Year-on-Year

Japan Imports 11.87mn Tonnes of Iron ore

According to the provisional data released by the Japanese Ministry of Finance, the country imported 11.87 million metric tons of iron ore and concentrate in March this year - an increase of 102.7 percent year on year.

The value of these imports was JPY 78.83 billion ($836.48 million) in value, up 31.8 percent compared to March 2009. The average iron ore import price in March this year stood at JPY 6,641/mt ($70.46/mt)

In the Japanese fiscal year 2009-10 (April 2009-March 2010), Japan imported 115.2 million metric tons of iron ore and concentrate, at a cost of JPY 813.08 billion ($8.63 billion), a decrease of 10.3 percent and 38.8 percent respectively.

In FY 2009-10, the average import price of iron ore was JPY 7,058/mt ($75/mt on current exchange rate).

CBH Backs Toho Bid

Independent Directors Unanimously Back Bid

Independent directors at Australia’s CBH Resources' have unanimously backed Japan's Toho Zinc's friendly takeover offer for the zinc, lead and silver miner

CBH said in a statement Toho was offering 24 cents a share cash and $1000 cash per CBH convertible note. The offer, which already owns 24.1 per cent of CBH, was above an independent expert's valuation range of 18.7-23.2 cents a share.

It said the offer was subject to 90 per cent shareholder approval.

"This offer from CBH's major shareholder, Toho, is very attractive for CBH shareholders, particularly when compared to previous proposals received recently by the company," Managing Director Stephen Dennis said.

Toho said the offer valued CBH's ordinary equity at $262.7 million.

CBH has also been the target of Belgian’s Nyrstar, which has offered 19.5 cents a share and $1000 for each convertible note.

Korea, Japan To Oppose Iron Ore Price Hikes

Industries, Government Opposed To Pilbara Merger

South Korea’s government and the country’s steelmakers will hold talks in Tokyo with their Japanese counterparts about the sharp rise in iron ore prices.
The Korea Iron & Steel Association, whose members include Posco and Hyundai Steel Co., will hold talks in Tokyo with its Japanese counterpart to form a consensus, South Korea’s Ministry of Knowledge Economy said today.

The ministry said officials and executives at the joint government-private sector gathering concurred that the 90 percent on-year hikes in iron ore and 55 percent gains in bituminous coal prices will increase steel product prices, which will then cause price rises in other industries.

A joint press release said that "a rise in steel prices will adversely affect autos, shipbuilding and industrial plant sectors that can hurt consumers and overall sales," adding that companies in both South Korea and Japan have agreed to work together to follow price increases being pursued by global miners Vale, Rio Tinto and BHP Billiton. The groups are also concerned about a move to shorter-term contracts.

Chinese and European steelmakers have also made it clear that they oppose the rise in prices.

The bi-lateral talks are part of an annual gathering between the two groups and the countries’ governments. Talk will also focus on cooperation against plans to combine BHP and Rio Tinto’s plans to combine iron-ore assets in Australia claiming that the venture may hinder competition.

Lee Seung-woo, head of the Ministry of Knowledge Economy's steel and chemical industry division, represented South Korea at the meeting, while the Japanese delegation was headed by Masaki Koito, head of steel industry division at the Ministry of International Trade and Industry.

Executives from the Nippon Steel Corporation and the Iron and Steel Institute of Japan also attended the meeting.

Nyrstar Makes Fresh Offer For CBH Resources

New Offer At 19.5c a share

Belgium’s Nyrstar, the world’s largest zinc miner, has made an offer of 19.5c a share for Australian zinc miner, CBH Resources. Nyrstar has also offered $1000 per CBH convertible loan note.

CBH had previously recommended a joint venture deal and bid for part of the company from its largest shareholder Japan's Toho Zinc.

The Nyrstar proposal is subject to limited due diligence, which has now commenced, and on shareholders not approving the Toho deal at a meeting on April 28.

Last month CBH recommended shareholders accept a proposal to sell stock and bonds to Toho over a previous Nyrstar bid worth A$213 million.

CBH shares ended the day at 18.5c.

Pan Pacific Copper To Cut Refined Copper Output

Production To Fall By 1.6 percent

Pan Pacific Copper Co., the Nippon Mining/Mitsui Mining & Smelting joint venture that is Japan’s largest producer of the metal, has announced plans to cut its refined copper output by 1.6 percent in the first half of this fiscal year compared with 2009.

Output will drop to 291,600 metric tons in the six months ending Sept. 30 from 296,300 tons in the year-earlier period, the Tokyo-based company said in a statement today.

Kobe Steel To Build Plant In Vietnam

$1 Billion Nugget Plant To Start Production In 2013

Japan’s Kobe Steel Ltd. has been granted permission to build a $1 billion steel factory in Vietnam. The plant will use Kobe’s technology to produce nuggets from low-grade iron ore providing feedstock for electric-arc furnaces that usually use scrap steel.

It is envisaged that the plant will serve Vietnam and the rest of south-east Asia.

In a statement on Friday, Kobe said that the factory will be built in the northern province of Nghe And. Construction will begin in January 2011 with production scheduled to commence in 2013. On completion of the secondary phase of construction the plant will have a capacity of 2.4 million metric tonnes of nuggets. A wholly-owned subsidiary of Kobe will conduct a feasibility study for the project.

Iron ore for the plant will be sourced from Vietnam’s Thatch He mine which has a high zinc content and isn’t suitable for blast furnaces.

Iron Ore Talks "Pointless" - Chinese Steel Chief

China Will Have To Accept Near-Doubling Of Iron Ore Price

The chairman of one of China’s largest private steel company has described his country’s talks with the large iron ore miners as “pointless” in the wake of Japanese steel mills’ acceptance of rises of more than 90 per cent for the raw material.

Speaking in a telephone interview with Bloomberg, Shen Wenrong, chairman of Jiangsu Shagang said that Chinese steelmakers will have to accept the higher terms that Brazilian miner Vale SA has negotiated with Japanese steelmakers. Earlier this week Vale agreed a price of $106 per tonne, up 92 per cent over last year’s price, however unlike in previous years were prices were agreed for the period from April to March the current price will only run to the end of June and will be reviewed on a quarterly basis. Vale says that 97 per cent of its customers have now accepted quarterly price contracts.

“We have no options,” said Mr Shen, “Iron ore prices have gone too far. We have to accept it, although we can’t afford it.”

Meanwhile, the World Steel Association has asked regulators to probe what it described as an “oligopoly” among iron ore miners and the China Iron and Steel Association said it will hold an emergency meeting to discuss the issue.
Chinese steelmakers are still discussing their price. He Wenbo of Baosteel, which is leading the talks on behalf of his industry, said yesterday “the negotiations are very difficult.” Some smaller Chinese steelmakers have reached private deals with the iron ore miners.

The knock-on effect of higher iron ore prices looks to have been felt already. Lakshmi Mittal of ArcelorMittal said this week that he expects steel prices to rise by 21 per cent this year as a result of increased raw material costs.

Sumitomo Metal Mining To Resume Production At Harima Smelter

Japan’s Sumitomo Metal Mining Co Ltd announced on Thursday that production at its Harima zinc and lead smelter will resume from May 6.

The company has been carrying out maintenance at the plant since 18 March, the company said.

The company also announced a number of other closures for some of its smelters and refineries.

The Niihama Nickel Refinery will be shut for four days in May and four days in November for regular maintenance.

The Hyuga ferronickel smelter will be closed for 21 days during May and June for repairs on one production line and for 25 days in November for repairs on a second production line. The renewal of a line of double furnaces, which has been ongoing since February 2010, is scheduled to finish at the end of August. Production will resume then.

Earlier this month, the company said it has no regular maintenance and repair work planned for 2010/11 at its Toyo Smelter & Refinery.

Mutsui Cuts Zinc Production

Fall In Demand Blamed for Cut

Mitsui Mining and Smelting Co is to cut zinc production by 0.9 per cent in the April-September period compared to a year earlier. The cut reflects a fall in demand for zinc, which is usually used as an anti-corrosive coating in galvanised steel production.

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.

Japanese Steelmakers Set To Agree Iron Price Doubling

Major Japanese steelmakers and Brazilian miner Companhia Vale do Rio Doce are expected to agree to an increase in the price of iron ore of almost 100 per cent to about $110 per metric ton by the end of this month, the Yomiuri Shimbun has reported.

The paper said that Japanese steelmakers also are negotiating prices with two other mining companies – BHP Billiton and Rio Tinto - and will reach agreements on similar prices.

It is also likely that they will agree to the introduction of a new system under which prices would be reviewed every three months, a move that could lead to a further increase in July.

The average price for spot trades has risen to between $130 to $150 per ton since February--up from $60 a tonne last spring.

Iron Ore Miners, Steelmakers Moving Away From Annual Contract

London’s Financial Times newspaper reports on Monday that iron ore miners and Japanese steelmakers have reached a tentative agreement to adopt short-term contracts linked to the spot market, bringing to an end the 40-year old annual benchmark system.

"There is an understanding on both sides to move to quarterly pricing," the newspaper quoted a source involved in the talks as saying. The source added that a final deal will be settled in a matter of weeks.

Reuters confirmed sources in Asia as saying that negotiations were continuing about a move to quarterly pricing.

"Korea, Japan and China have received 90-100 percent hike offers based on quarterly systems from miners, which Japanese steelmakers seem to move toward accepting," a source at a large Asia steelmaker close to the negotiations said.

One sources suggested that Japanese steel mills are ready to accept the change as they are more concerned about security of supply than prices and are seeking to safeguard tonnage rather than prices.

Current spot iron ore prices are trading at twice the level of the 2009 benchmark.

A move towards quarterly coking coal contracts was announced earlier this month and analysts expect iron ore to adopt a similar system.

More Japanese Steelmakers Agree Quarterly Coal Contracts

In a further indication of a shift to quarterly raw materials contracts, more Japanese steelmakers have struck deals with coal miners for the April to June quarter.

JFE Holdings, Kobe Steel and Sumitomo Metal Industries have both agreed a price of $200 a tonne, up 55 percent from the deal for the previous financial year, the firms said on Wednesday. JFE and Kobe have signed deals with miners BHP, Rio and Teck Resources, while Sumitomo have agreed a deal with BHP.

While the steelmakers are all looking for a return to an annual contract from 1 July, the miners have the upper hand as they try to move to a system that reflects changes in the market, but which leaves the steelmakers exposed to greater volatility in cost and renders them exposed to the spot market.

NMDC Expects 40 Per Cent Rise In Iron Ore for Japan

Indian state-owned iron ore miner, NMDC said on Monday that it expects a 40 per cent rise in the price of iron ore it supplies to Japanese steel mills in the next year. Preliminary talks with the mills begin on Wednesday.

NMDC has long-term agreements with a number of Japanese steel firms and the company says that it expects prices of iron ore lumps to rise from $85 a tonne to around $110 a tonne, while iron ore fines will be rise from $61 to $85 a tonne.

Vale "Walks Out Of Iron Ore Talks"

China’s National Business Daily is quoting a steel producer in China’s Hebei province as saying that Brazilian miner, Vale, the world’s largest iron ore miner, has quit the annual iron ore benchmark talks currently taking place between the large iron ore miners and China’s leading steel companies.

Vale have refused to comment.

As previously reported, Vale want to move away from an annual contract price to the spot price. However, spot prices are 80 per cent higher than last years’ contract price, and China’s steel mills have suggested that they will find a contract price rise of 40 to 50 per cent unpalatable amid suggestions that their profit margins have already been eroded. The price difference between the two parties may well explain Vale’s refusal to negotiate

Meanwhile, reports from Japan suggest that leading Japanese steelmaker, JFE Steel, are ready to accept a 90 per cent rise in their iron ore contract price. Vale have offered the new price for the April to June quarter and the Nikkei Daily reports that JFE are ready to accept. The company recently accepted a 55 per cent increase in the price it pays coal miner BHP Billiton for its coking coal.

BHP Moves Coking Coal Prices To Shorter Contracts

BHP Billiton, the world’s largest miner, said on Monday that it had moved a “significant portion” of its coking coal sales for 2010 to “shorter term market based pricing”. This follows an agreement last week with Japanese steelmaker, JFE, in which it agreed an April to June contract price increase of 55 per cent.

Traditionally, coking coal prices have been agreed annually and there has been some resistance on the part of steel makers to agree to shorter-term contracts.

“These settlements reflect the company’s commitment to achieving market clearing prices over time across all its bulk commodities,” the company said in a statement. It said it had reached agreements with customers in Japan, China, India and Europe.

Indian analysts said they had been expecting a price of $180 a tonne for coking coal instead of the $200 a tonne they now face being charged. Pawan Burde of PINC Research said “Steelmakers will have to increases prices by $60-70 per tonne,” though with demand for Indian steel still strong he doesn’t see this as a problem.

BHP To Meet Japanese Steelmakers Next Week

BHP Billiton Ltd., the world’s largest mining company, is to hold talks with Japanese steel mills next week on proposed quarterly pricing contracts for coking coal, according to investment bank UBS AG said.

Analysts led by Tom Price said in a note today that talks will be held through the BHP Billiton Mitsubishi Alliance.

BHP told Japanese steelmakers last month that it wants to set coking coal prices on a quarterly basis rather than annually.

“We expect BHP to secure some quarterly contracts this year at close to spot,” Price said. Contract prices are $129 a ton for the year ending March 31.

Xstrata Puts USD100 a Tonne Tag On Thermal Coal

Reuters has reported that Xstrata Plc has offered Japan's Chubu Electric annual thermal coal contracts starting in April at $100 a tonne, up by 43 percent from the settled price last year, sources said on Wednesday.

"The Xstrata guys are in town at the moment and they have tabled an offer at $100 a tonne," said a source from Chubu with knowledge of the negotiations. Chubu are said to be holding out for $85-90 a tonne.

Last year’s contract prices were between $70 and $72 a tonne and represented a 44 per cent fall on the 2008-09 price. Sources suggest that Chubu will adopt a ‘wait and see’ stance and weigh up demand from other Asian customers such as China or India.

Xstrata was successful in achieving an $85 a tonne price for contracts that began in January.