TODAY In Ferrous Metals ›

China, which is symbolised by its iconic dragon, is expected to help drive a recovery in metals, possibly as early as 2010.

China iron-ore talks not dead yet - Rio

Reuters | Mon, 29 Jun 2009 13:31
[miningmx.com] -- Rio Tinto, the world number-two iron ore miner, is still in talks with Chinese steel mills over iron ore prices, the firm said on Monday, dousing speculation that both sides had given up on a June 30 deadline.

Iron ore miners and their Chinese customers have until Tuesday to reach a pact on contract prices for the current fiscal year, but analysts have said the two sides appear too far part at this late hour to strike a deal in time.

"We are officially still in negotiations," a Rio Tinto spokesman told Reuters when asked if the parties had given up trying to hammer out a deal by the deadline.

Spot prices delivered in China have risen around 25 percent this month to a four-month high above $80 a tonne, adding around $5 in the last week, on expectations millions more tonnes will hit the market unless the miners and mills reach agreement.

Spot prices are now trading at $12-$15 a tonne over benchmark prices already set separately with Japanese and South Korean steel mills, which recently agreed a 33 percent price cut.

The higher spot price could be encouraging producers to take a harder line with Chinese steel mills, which are holding out for a minimum price cut of 40-45 percent.

Rio Tinto and world No. 3 iron ore miner BHP Billiton have argued against a benchmark price set below the spot level, saying it is unfair to producers and fails to accurately reflect market demand.

If the miners and Chinese mills reach a deal by Tuesday, the contract price would be backdated to April 1 and run until March 31, 2010.

BHP Billiton declined to comment on the state of play.

"We could see a lot more emphasis on the spot market next week," said DJ Carmichael & Co mining analyst James Wilson.

"That translates into volatility and that will be a positive for the price."

The Australians want the mills to agree to a 33 percent price cut over last year, in line with benchmarks already set with Japan's Nippon Steel and JFE and Posco of South Korea or buy ore on the spot market.