Global mining giant BHP Billiton yesterday said it would now sell iron ore to most Asian steel mills on a short-term basis, scrapping an annual pricing model that provoked acute tensions with China.
The Anglo-Australian company said a “significant” number of Asian customers had agreed to the change, which heralds the demise of a decades-old system and shakes up a key market for the region’s dynamic economic growth.
The announcement comes a day after China jailed four employees of rival mining company Rio Tinto for corruption during last year’s collapsed iron ore pricing talks, blaming them for costing the country huge economic losses.
“BHP Billiton today announced 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 ... basis,” the company said in a statement. “The agreements reached represent the majority of BHP Billiton’s iron ore sales volume.”
BHP, which has long lobbied for the change and recently unveiled a similar arrangement for coking coal, released its statement a day before the current annual iron ore contracts were to expire.
Investors reacted enthusiastically to the new arrangement with BHP’s share price rising 2.37 percent, to A$44.41 (US$40.72).
While the biggest Asian mills favored the certainty provided by annual prices, smaller operators were frozen out by the mining giants — leading to the bribery exposed in the Rio case as they vied to grab a piece of the action.
“We believe this represents a significant win for BHP Billiton over Asian steel mills who have long resisted the move away from annual contract pricing,” IG Markets analyst Ben Potter said. “BHP Billiton appears to have convinced them that this is a fairer and more transparent way of pricing that eliminates large discrepancies between spot and contract pricing.”
BHP chief executive Marius Kloppers said last month that instead of fixed annual prices, the spot or real-time market was the best indicator to “what expectations should be on where prices are heading.”
BHP’s move may help soothe increasingly fraught relations between miners and China, now the world’s biggest consumer of iron ore used for steel in everything from buildings to roads, cars and appliances.
Analysts said fellow top producers Rio and Brazil’s Vale were likely to follow the BHP move, which had become inevitable after a dramatic rise in spot prices in recent years stoked by insatiable demand from China.
Japanese press reported yesterday that Nippon Steel has agreed in principle to a massive hike in the price of iron ore it buys from Vale.
The new price will be in the range of US$105 to US$110 per tonne for the April-to-June quarter, the reports said. Before falling last year in the global economic crisis, iron ore fetched a record US$77 to US$79 per tonne in 2008.
A Chinese aircraft carrier group entered Japan’s economic waters over the weekend, before exiting to conduct drills involving fighter jets, the Japanese Ministry of Defense said yesterday. The Liaoning aircraft carrier, two missile destroyers and one fast combat supply ship sailed about 300km southwest of Japan’s easternmost island of Minamitori on Saturday, a ministry statement said. It was the first time a Chinese aircraft carrier had entered that part of Japan’s exclusive economic zone (EEZ), a ministry spokesman said. “We think the Chinese military is trying to improve its operational capability and ability to conduct operations in distant areas,” the spokesman said. China’s growing
Taiwan yesterday denied Chinese allegations that its military was behind a cyberattack on a technology company in Guangzhou, after city authorities issued warrants for 20 suspects. The Guangzhou Municipal Public Security Bureau earlier yesterday issued warrants for 20 people it identified as members of the Information, Communications and Electronic Force Command (ICEFCOM). The bureau alleged they were behind a May 20 cyberattack targeting the backend system of a self-service facility at the company. “ICEFCOM, under Taiwan’s ruling Democratic Progressive Party, directed the illegal attack,” the warrant says. The bureau placed a bounty of 10,000 yuan (US$1,392) on each of the 20 people named in
Nine retired generals from Taiwan, Japan and the US have been invited to participate in a tabletop exercise hosted by the Taipei School of Economics and Political Science Foundation tomorrow and Wednesday that simulates a potential Chinese invasion of Taiwan in 2030, the foundation said yesterday. The five retired Taiwanese generals would include retired admiral Lee Hsi-min (李喜明), joined by retired US Navy admiral Michael Mullen and former chief of staff of the Japan Self-Defense Forces general Shigeru Iwasaki, it said. The simulation aims to offer strategic insights into regional security and peace in the Taiwan Strait, it added. Foundation chair Huang Huang-hsiung
PUBLIC WARNING: The two students had been tricked into going to Hong Kong for a ‘high-paying’ job, which sent them to a scam center in Cambodia Police warned the public not to trust job advertisements touting high pay abroad following the return of two college students over the weekend who had been trafficked and forced to work at a cyberscam center in Cambodia. The two victims, surnamed Lee (李), 18, and Lin (林), 19, were interviewed by police after landing in Taiwan on Saturday. Taichung’s Chingshui Police Precinct said in a statement yesterday that the two students are good friends, and Lin had suspended her studies after seeing the ad promising good pay to work in Hong Kong. Lee’s grandfather on Thursday reported to police that Lee had sent
RSS