BHP Billiton to Go for Short-Term Pricing of Iron

Submitted by Jim Thesiger on 30 March, 2010 - 15:56

Australia based miner BHP Billiton (BHP) has made an announcement today claiming that the company is going for short-term pricing of iron ore deals with quite a few Asian buyers which were priced at a yearly basis in the past. The recent development is being considered as a great victory for the miner as it was campaigning to come out of the yearly traditional benchmark system of pricing iron ore. BHP has been raising its voice for some time now to bring changes in the benchmark system for both iron ore and coking coal shifting towards a quarterly system as it considers the short term pricing as more transparent and fair.

It is to be mentioned that Japan based Nippon Steel and Sumitomo Metal Industries has struck an agreement with leading iron ore producer Vale for a price hike (which is approximately 90 percent) of iron ore for the quarter of April-June. Posco, another consumer of iron ore which buys iron jointly with Nippon Steel has also struck a provisional deal with the Brazilian miner on a 90 per cent price hike from a year earlier to as much as $US100-$US110 a tonne, according to a source. Another source revealed that Vale and Sumitomo is currently holding talks to determine the price although a provisional agreement has been reached by the two sides. However, Sumitomo Metal Industries and Nippon Steel were yet to come up with an agreement with BHP regarding the prices.

The final price may break the record of around $US79 per tonne which was set during the financial year 2008. The settlement is going to boost the price for the first time in two years due to which the steelmakers may ask the car manufacturers and other customers to accept a price hike in the steel market. Rio Tinto (RIO)- another major player of the industry along with Vale has expressed their support to the campaign of coming out of the annual benchmark system this year.