Iron ore prices set by market not miners - Vale
The diversified miner says the market is so dynamic that "no one was able to continue with the benchmark mechanism
Posted: Wednesday , 02 Jun 2010
SHANGHAI (Reuters) -
mineweb.com
Iron ore prices are being set by supply and demand in the market, not fixed by producers, said Roger Agnelli, president and chief executive of Brazilian mining giant Vale (VALE5.SA).
Chinese steel mills have complained bitterly about the sharp increase in iron ore prices imposed upon them by the three dominant global producers -- Vale together with Australia's Rio Tinto (RIO.AX)(RIO.L) and BHP Billiton (BHP.AX)(BLT.L), which control about three-quarters of the global seaborne iron ore market.
"Vale is not fixing prices -- who is fixing the prices is the market," Agnelli told a news conference in Shanghai on Tuesday.
Chinese mills have also complained that they are being forced to accept a volatile new index-based quarterly pricing system, but Agnelli said the old method in which prices were set annually through negotiations had been undermined by changes in the market.
"The market is so dynamic that no one was able to continue with the benchmark mechanism," he said.
The company's ferrous metals director, Jose Carlos Martins, speaking at the same briefing, confirmed that iron ore prices in the third quarter would be based on average second-quarter prices, and would rise accordingly.
Martins said in the long term, iron ore prices should be set by market forces of supply and demand, as with other commodities.
"Nobody disputes about prices of soybeans, aluminium and copper -- if you want to buy, you buy. In the long term, iron ore prices will be fixed the same way."
Agnelli said the company was confident that demand would continue to remain strong.
Chinese imports of iron ore surged dramatically last year even as the global economic crisis eviscerated steel markets in Europe, Japan and the United States, rising 41.57 percent to 627.78 million tonnes.
Imports from Brazil alone have surged 22 percent over the first four months of 2010, reaching 42.9 million tonnes -- a fifth of China's total.
"In Vale we pray for China every day," Agnelli said.
(Reporting by Rujun Shen and David Stanway, Editing by Ken Wills) |
