Rio Tinto and BHP Billiton have secured agreement from Chinese steel mills to a 33% price cut in iron ore, market sources said. China originally wanted a much greater reduction in price but as the world-wide opposition had already signed, China was forced to agree to the price, although it has officially been kept out of the press.
However sources, who did not want to be named but include people on both sides of the negotiations, said some mills had agreed to a 6-month contract and some a year, but there would be no formal announcement by the China Iron & Steel Association.
Rio Tinto said in its second quarter operating review that China’s steel bandwagon will keep rolling for the rest of this year. Anglo-Australian miner Rio reported all-time high iron ore production of 45.2 million tons, an 8% rise from a year ago.
Analysts say Rio’s assessment is positive for the dry-cargo market — ships which carry the ore to China — which has fed off a rebound in Chinese iron ore demand in the first half of 2009.
Iron ore shipments from Rio’s Pilbara operation in Western Australia during the second quarter totalled 52.5 million tons, 33% more than the previous quarter and a 14% increase on the same period of 2008.
Asiais said CISA officials were not immediately available to comment. And probably this will remain the case for the foreseeable future. This was a very tough bargaining session and there are suggestions of both hanky and panky on both sides of the negotiating table.