World top iron ore miner sells product at discount
22/04/09
The world`s top iron ore miner, Brazil`s Vale as confirmed it is selling iron ore at a 20 percent discount to 2008 benchmark price until new contract prices are set.
Posted:; Monday , 20 Apr 2009
SAO PAULO (Reuters);-;
Brazil`s mining giant Vale (VALE5.SA: Quote) (RIO.N: Quote) said on Monday that it is selling iron ore at a 20 percent discount to 2008 benchmark prices, until new annually revised term contract price agreements were set.
New term prices, which are agreed on by the world`s largest iron ore miners and steel makers, usually take effect from April 1. But price changes are applied retroactively if they have failed to reach a deal by then, as happened this year.
Vale said in a statement to the market that it was being flexible on ore term prices on a provisional basis, allowing clients to pay 80 percent of the 2008 benchmark price for shipments and to settle any balance once 2009 prices are set.
“Provisory sales are equivalent to 80 percent of 2008 benchmark prices and they will be adjusted afterwards, according to 2009 benchmark price negotiation outcome,” Vale said.
Analysts say that Vale`s Australian rivals BHP Billiton (BLT.L: Quote) and Rio Tinto (RIO.L: Quote) have been active in selling ore on a spot basis. The discount offered by Vale will help it compete for market share in iron ore without jettisoning the benchmark system. It has insisted it does not sell on the spot basis.
Vale told reporters in February during a conference call on its fourth-quarter results that it had signed on several new Chinese clients to iron ore supply contracts, but denied that it was selling ore at a discount to the benchmark rate or on the spot market.
Demand for iron ore has weakened since the global economic crisis took hold last September as industries reduce their output and requirements for steel, the main end use for iron ore.
Brazilian contract iron ore prices range from around $76 to $92 per tonne, depending on the mine. Spot iron ore prices soared as high as nearly $200 a tonne last February, then tumbled as low as around $60 a tonne in October as the financial crisis deepened. (Reporting by Camila Moreira, Roberto Samora, Reese Ewing and Peter Murphy; Editing by Christian Wiessner)
Reuters