Iron ore giants could sign monthly pricing agreements with Chinese mills

Tuesday, 07 September 2010 15:33:52 (GMT+3)   |  
       

Feng Guiquan, deputy president of Chinese state-controlled metals and mineral trading company China Minmetals Corporation, has stated in that the three iron ore mining giants (Vale, Rio Tinto and BHP Billiton) are expected to sign monthly pricing agreements with Chinese steelmakers.

Mr. Feng said that, with the long-term pricing system disintegrating in 2010, the pricing system is now based on spot market prices and the quarterly pricing model. The market is now more complex and the indexes can be manipulated, so price fluctuations will be more severe, he said.

Secondly, it will be more difficult to make profits. The contract price is often higher than the spot market price, so imports may bring losses, Mr. Feng said, adding that uncertain purchase prices may increase the risk of breach of contract.

Mr. Feng also stated that China Minmetals Corporation supplies an annual 20 million mt of 66 percent grade iron ore to the Chinese market, of which 5-6 million mt is domestic production. He said China Minmetals Corporation plans to increase its supply of domestic production iron ore to 10 million mt in the 12th five-year plan period (2011-2015).


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