Rio Tinto agrees to 33% cut in iron ore price
Australian miner sets first contract with Nippon Steel
By Tom Stundza -- Purchasing, 5/26/2009 10:13:00 AM
Australian newspaper The Age is reporting that Rio Tinto and Nippon Steel have agreed to cut key iron ore prices by 33% in this fiscal year's first contract deal, setting an iron ore price benchmark that China's steel mills almost certainly will resist as not enough of a discount after six years of surging prices.
JFE Holdings and Sumitomo Metal Industries also agreed to these prices with Rio but the Chinese mills want at least a 40% price cut from their Australian and Brazilian ore suppliers. South Korean steel maker Posco, the world's fourth largest steelmaker still is negotiating with Rio and had not decided whether it would follow Nippon Steel's lead.
Rio Algom, the world's second-largest producer, has agreed to sell its fine ores to No. 2 global steelmaker Nippon Steel at 97¢/dry metric ton unit, down from $1.4466 in the past fiscal year. Chinese mills mainly buy iron ore fines. Higher-quality lump ore will sell for $1.12/metric ton for customers primarily in Japan and South Korea, down nearly 45% from $2.0169.
Mark Pervan, head of commodities research at Australia and New Zealand Banking Group in Melbourne tells The Age that Rio Tinto--and its Australian rivals BHP Billiton and Fortescue--may have to add another 5-10% to the Japanese price cuts when they complete negotiations with the Chinese. The newspaper says a first reaction from China suggests Pervan's assessment may be right.
Speaking for the China Iron & Steel Association, Maanshan Iron & Steel says it still wants a 40% cut in benchmark iron ore prices. “We import more than Japan does,” the company says, adding that “since the current ore demand is not very big and out operational rate is not very high, Chinese steelmakers should not compromise.”
Posco gets 33% iron ore price cut
05/29/2009
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