It is reported that world leading iron ore provider BHP Billiton recently announced that the company is planning to turn to short-term pricing negotiation, indicating that it may quit the global iron ore long term benchmark pricing negotiation and continue to promote its iron ore index price.
BHP Billiton reported recently that in the Q4 of 2009, 46% of iron ore it exported from Australia was priced through short-term negotiation. In July 2009 the figure was only 30%.
Mr Zhang Ping an analyst with umetal.com said that BHP Billiton announcement can be understood as a negotiating strategy. He believed that the company won't quit the global negotiation, but it can add pressure on Chinese steel mills by doing this.
He said that China's discourse power in the iron ore pricing negotiation will remain limited in a couple of years, but it will win some pricing power after 2012.
Mr Zhang said Chinese enterprises are actively buying overseas resources. Iron ore supply will see a significant rise in 2 years and the global mining giants dominating position will be weakened. In addition, China steel industry will finish its restructuring and the country demand for steel will not see huge increase by then.