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To: LoneClone who wrote (38362)	6/10/2009 12:04:17 PM
From: LoneClone	Read Replies (1) \| Respond to of 194000

UPDATE 3-Vale cuts iron price to Japan, Korea steelmakers Wed Jun 10, 2009 10:14am EDT reuters.com * Vale slashes ore prices to Japan and Korea * Follows similar cut by Australian rival Rio Tinto * Sets the stage for tough price talks with China (Adds bylines, recasts, adds analyst quotes) By Brian Ellsworth and Denise Luna RIO DE JANEIRO, June 10 (Reuters) - Brazilian miner Vale said Wednesday it slashed iron ore prices to Japanese and Korean steelmakers in a widely expected move following similar cuts by rivals as global demand for commodities slumps. But analysts said the move bolsters the position of Vale (VALE5.SA)(VALE.N), the world's biggest iron ore miner, in talks with Chinese steelmakers seeking even bigger price cuts. The tough stance of China, the world's largest steel producer and iron importer, threatens to derail a 40-year-old benchmarking system for ore prices that is under growing strain as spot market sales increase and the global economy slows. Vale said in a securities filing it cut fine ore prices by 28.2 percent from 2008 levels, less than the 33.5 percent cut offered by Australian rival Rio Tinto (RIO.L)(RIO.AX) and far below the 40 to 50 percent reduction China is seeking. "The Chinese are going to be very unhappy about this, they're going to be up the wall," said Chuck Bradford, an independent metals analysts, adding China's imports are largely focused on fine ore. Vale cut the higher-quality lumps prices by 45 percent to steelmakers that include Japan's Nippon Steel Corp. (5401.T), and South Korea's POSCO (005490.KS) -- almost identical to Rio's price cut for those countries' buyers. It also cut the price of pellets, which are less important to the company's operations, by 48.3 percent. "This is not far from what we expected, the market was talking about something between 25 and 27 percent for fines, which is the principal product for Vale," said Pedro Galdi, an analyst with the brokerage SLW in Sao Paulo. "But the important thing now is China -- there is a lot of pressure to close that deal before the end of the month." A Vale spokesperson said there would be no further comments from the company about the price cut. Rio, the world's second-largest iron producer, in May agreed to reduce fine ore prices by 33 percent from 2008 prices to Japanese buyers and cut higher quality lump ore prices by 45 percent. Last week it announced a proposed tie-up of iron operations with Australian Rival BHP Billiton (BHP.AX)(BLT.L) that would have to be approved by anti-trust regulators. Rio, BHP and Vale set iron ore prices each year in talks with steelmakers, a benchmarking system that has characterized iron markets for decades. Experts say the growth of spot market sales and possibility for widespread use of futures contracts threatens to render the system obsolete, though analysts say it provide protection from growing volatility of commodities prices. Miners until last year had the upper hand in price negotiations as strong demand let them command hefty increases, the financial crisis turned the tables, giving Asian steelmakers a stronger position to demand steep cuts. Vale this year waited for other producers to announce the new prices they had negotiated before committing to a rate after Australian miners clinched better deals in 2008 based on lower shipping costs. For a graphic of global iron ore prices, please click on: [here] (Reporting by Elzio Barreto, Guillermo Parra-Bernal and Denise Luna, Writing by Brian Ellsworth; Editing by John Picinich)