Rio Tinto Ltd/Plc is selling most of its iron ore at fixed or provisional benchmark prices, halting most of the spot market sales that made up half its first-half output, even as Chinese mills hold out for cheaper annual rates.
The comments by CEO Tom Albanese lend support to talk that many Chinese mills have tacitly agreed to the 33 percent price reduction set in May by Japanese buyers, although the Chinese industry as a whole has not formally accepted the benchmark.
'Right out now we are primarily selling at provisional pricing, reflecting the existing benchmark settlement we've had with Japanese and other producers and will continue to do so until circumstances change,' Albanese told reporters after the world's No. 2 mining house reported a 54 percent slump in first half underlying earnings.
Rio Tinto and other miners diverted millions of tonnes into the spot market earlier this year as mills outside China abruptly cut production due to the recession.
But demand from China soared as mills ran near flat out thanks to Beijing's stimulus package, while speculators also built up iron ore and steel inventories, helping lift spot prices above $100 per tonne for standard 63.5 percent iron ore -- far beyond the roughly $63 a tonne benchmark set in May.
As spot prices surged, demands by the Chinese Iron and Steel Association umbrella group for a discount of as much as 45 percent this year appeared increasingly untenable.
Source: Reuters
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