Platts, in a report, said that China five largest steelmakers proposed to one of the world’s top three suppliers that they would pay a provisional 40% more for contract iron ore than a year ago. The Platts report said that an agreement may have been reached.
As per report “Miners are reportedly nearing a deal for a 40% provisional price hike in the 2010-2011 talks.”
The report added that “According to a mining executive familiar with the annual negotiations, the 40% price increase was discussed with the five biggest Chinese steel mills individually and an agreement was thought to have been reached.”
The same mining company executive pointed out that seeking a 40% hike was indeed only a provisional arrangement and that if there were an annual price agreement at all, it would have to be a price hike on the order of 80% for the 2010-2011 delivery period.
Still, the mining executive was optimistic that the mills will agree to the 40% uplift in contract pricing within the next few weeks, particularly at those mills with contracts running January to December.
40% increase over the 2009-2010 benchmark price means Australian iron ore fines would be USD 1.358 per dry metric tonne unit or USD 84 per dry metric tonne FOB Australia for 62% Fe. From Brazil, this would equate to a new price of USD 1.258 per dmt unit or USD 83 per dmt FOB Ponta da Madeira for 66% Fe Carajas fines.
Such prices are still well below current spot prices, which Thursday were at USD 117 per dmt FOB Australia and USD 98.43 per dmt FOB Brazil for 62% Fe content fines, according to Platts' assessments and freight netbacks.