Brazil's Vale Sees Signs China Opting For Ore Term Deals
July 30 2009 - 1:33PM
Dow Jones News
Brazilian miner Vale S.A. (VALE) sees signs Chinese steel
companies are opting for iron ore term contract prices instead of
the spot market, a Vale executive said Thursday.
"I think this will be the trend as spot prices increase," Jose
Carlos Martins, director for ferrous minerals and metals at Vale
S.A., said at a second quarter results conference call with
analysts.
Martins earlier noted that Chinese spot prices reached $93.50
per metric ton yesterday.
Vale's benchmark prices rose 65% to 71% last year, depending on
grades. The company said it was paid an average of $67.32 per ton
in 2008.
Owing to the global economic crisis and consequent plummeting
steel demand, Chinese mills have been attempting to secure a cut of
around 40% in last year's benchmark contract price.
However, the big three ore producers, Vale, Rio Tinto (RTP) and
BHP Billiton (BHP) have yet to settle with the Chinese mills.
The three miners have already closed 2009 term contract prices
with steel mills in other Asian countries, Europe and the Americas
with a discount of around 28%.
In order to exercise some control over the spot market, China is
reported to be looking at a licensing system to limit access.
China is also reported to be wanting to put a ceiling on spot
market prices, which would stimulate more domestic ore
production.
Martins said Vale's position was to "wait and see".
"We've no idea what the outcome of Chinese discussions on this
will be," he said. "China is becoming very important in iron ore
and we would expect it would base more decisions on the
market."
-By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086;
John.Kolodziejski@dowjones.com