Rumors have recently been circulating that the three global mining giants, BHP Billiton, Rio Tinto and Vale, intend to raise their iron ore contract price to $160/mt for the third quarter for Chinese mills, based on average spot prices in the March-May period. Imported iron ore (63.5 percent Fe) is now priced at $165/mt CFR in the spot market, down from the April level of $190/mt CFR, decreasing by 13 percent.
The Q2 contract price is just a temporary price, market insiders say. According to Platts' iron ore pricing index adopted by Vale, Q3 prices would be calculated based on the average spot prices during the last three months, i.e., from March to May.
As a representative of one Chinese mill stated, "We have not yet talked with Vale about the price for the third quarter, nor have we talked with the other two companies in question. However, we are planning to negotiate with them in June. The expectation of a level of $160/mt, as mentioned by market rumors, will not be accepted by the Chinese mills."
The recent decrease in finished steel prices in China is a major reason why Chinese mills will oppose any further increases in iron ore prices.