Rio Tinto joins BHP Billiton, Vale in moving to quarterly iron ore contracts
10 Apr 2010
The 40 year-old annual iron ore benchmark system was first put in the coffin late last month by Vale of Brazil and Anglo Australian miner BHP Billiton, but yesterday Rio Tinto hammered the final nail on it saying that it is also switching to iron ore supplies priced on a quarterly basis.
In a statement yesterday, the world's second-largest iron ore miner said, ''Rio Tinto is currently negotiating contracts with its customers to supply iron ore priced on a quarterly basis.''
Lat last month, the worlds largest and the third-largest iron ore miners Vale of Brazil and Anglo Australian miner BHP Billiton respectively, had made a breakthrough in trashing the traditional annual iron ore benchmark pricing by getting Japanese steel mills to agree to a quarterly rate negotiaiton, with Vale managing to get a 90-per cent rate hike for this quarter. (See: BHP, Vale wrangle quarterly iron ore deal with Japan, Vale gets 90-per cent hike)
This was a major breakthrough for the miners, especially for BHP Billiton, which has been doggedly pursuing for the past five years the switchover of the annual iron ore contract system in favour of quarterly ones, which are closer to prices on the spot market.
Although BHP Billiton did not reveal at what price it closed deals with its customers, it said that it had, ''reached agreement with a significant number of customers throughout Asia to move existing iron ore contracts that were previously priced annually onto a shorter term landed-price equivalent basis. The agreements reached represent the majority of BHP Billiton's iron ore sales volume.''
Citing sources from the Japanese steel industry, Macquarie Bank's London-based commodities team said this week that BHP Billiton has secured 99.7 per cent rise over 2009 prices or $120.08 a tonne for its Pilbara iron ore fines.
