UPDATE 1-Rio Tinto tells China to brace for Q1 ore hike -sources
reuters.com
Fri Dec 10, 2010 1:27am EST
* Chinese mills facing 7.6 pct ore price hike in Q1 * Contract price could rise to $138 per tonne in Jan (Adds detail, response from Rio Tinto, background)
SHANGHAI Dec 10 (Reuters) - Global mining giant Rio Tinto (RIO.AX)(RIO.L) has notified Chinese steel mills that it will raise contract iron ore prices by 7.6 percent in the first quarter of 2011, two sources told Reuters on Friday.
A trading source said Rio Tinto, the world's second-largest iron ore miner, has informed several leading Chinese steel mills about the imminent price change.
An iron ore buyer at a leading steel producer confirmed the 7.6 percent figure and said China's mills would have no choice but to accept it when the time came.
The Steel Index (TSI) calculated that Rio Tinto charged $128.76 per tonne for its 61.4 percent grade iron ore in the fourth quarter.
With a hike of 7.6 percent, prices would rise to $138.55 in the new year, according to Reuters calculations.
Rio Tinto declined to comment on the issue.
"We don't comment on pricing. We don't discuss it except with our customers," said Gervase Green, a company spokesman.
Brazil's Vale (VALE5.SA) and Australia's BHP Billiton (BHP.AX)(BLT.L), which together with Rio Tinto control about 70 percent of global seaborne iron ore trade, are expected to follow with similar price increases in the new year.
Traders have suggested Vale would request a 5 percent increase over the previous quarter's prices.
Following the collapse of the decades-old annual benchmark price system last year, Rio Tinto sets prices for each quarter based on index price averages in preceding months.
The first-quarter price for 2011 will be based on average prices from September to November 2010.
Contract prices fell in the fourth quarter of the year after spot market prices fell in the preceding calculation period.
The China Iron and Steel Association has opposed the new system, but has permitted individual steel firms to negotiate contract prices with the three dominant miners separately.
An official responsible for iron ore buying at a large mill said many smaller steel producers were moving away from the quarterly price regime in favour of more flexible monthly deals.
"Only a few big Chinese steel mills have received the notification of price hikes, and other steel mills will prefer to buy at monthly prices and bid materials in terms of different grades of ore," he said.
(Reporting by Ruby Lian, Manolo Serapio in SINGAPORE and David Stanway in BEIJING, Editing by Jacqueline Wong and Ken Wills) |
