Mining giant Rio Tinto said on Monday it had agreed to cut iron ore contract prices by between 33 percent and 44 percent for Japan’s Nippon Steel for the new contract year starting on April 1.
The price cut, in the first deal of the year, is not as deep as the 40 percent to 45 percent drop China’s steelmakers have been pushing for to reflect weaker market conditions.
Analysts said the Nippon deal could have little bearing on agreements with China, the world’s biggest importer of iron ore, which believes it should now be setting the benchmark in the annual talks between miners and mills.
One Sydney-based dealer said: “The deal with Japan doesn’t necessarily tell us anything about China ... The benchmark pricing system is becoming a bit of a dinosaur. It’s likely to continue to exist for Japan, but not necessarily China.”
Other major miners such as BHP Billiton and Companhia Vale do Rio Doce and key consumers such as Chinese steel mills are still negotiating contract prices. The deal with Nippon, the world’s second-largest steelmaker, represents falls of 44 percent for lump prices and 33 percent for fines. Rio Tinto said it would sell iron ore fines for US$0.97 per dry tonne, compared with US$1.446 last contract year and would charge US$1.12 a tonne for lump iron ore, down from US$2.0169.
“We believe this settlement is a realistic outcome for both parties, one that reflects the global market for iron ore and the current challenging market conditions facing our customers,” Rio’s iron ore chief Sam Walsh said.
Walsh earlier told a mining conference that Rio’s mines had been “flat out” meeting Chinese demand, with the global economic downturn and commodities price slump forcing the closure of smaller mining operations there.
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