Brazil Vale:BHP-Rio Deal Hits China Bargain Power-Estado
June 05 2009 - 5:30PM
Dow Jones News
Brazilian mining company Vale SA (VALE) sees the joint venture
planned by BHP Billiton (BHP) and Rio Tinto (RTP) limiting China's
chances of arbitrating supplier iron-ore prices, the Estado news
agency reported Friday.
According to Vale's chairman, Sergio Rosa, Vale's main worry had
been that Rio Tinto's financial difficulties would force it to cut
ore prices to gain market share in the global economic crisis.
"It's bad for any supplier in a negotiation to be in a position
of weakness that forces it to sharply lower its prices in order to
guarantee a market," he said.
"That was the fear we had with Rio Tinto. B-ut, I think that
danger is being avoided," he added.
Rosa said he believed Vale would benefit indirectly from the
BHP-RTP tie-up.
Vale has stated it will only agree to ore term prices once the
Australian mining companies have settled.
China has been pressing for a 50% reduction on the 2008 contract
price, but the market consensus points to a likely cut of much
less, with large investment banks forecasting Vale's cut at around
27%.
Rosa also said he expected there would be operational synergies
between Rio Tinto and BHP through cutting costs.
By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086;
john.kolodziejski@dowjones.com