Iron ore miners and steelmakers could return to the annual benchmark pricing system in the next five years, a steel industry group says.
In April this year miners and steel producers shifted to a spot-oriented, three-month based pricing system. That ended the decades old benchmark system whereby annual prices were set once a year between the parties.
"I think it may return to annual contracts but it will take a shift by one of the majors (iron ore miners)," Gordon Moffat, European steel group Eurofer director general, told Dow Jones Newswires.
"It may wait until the market is less tight.
"There are already mid-level iron ore producers that prefer it," Mr Moffat said.
UBS predicts the iron ore market will remain tight in 2010, be balanced in 2011 and by 2012 be in a small surplus that should grow to 167,500 tonnes by 2015 if new projects and expansions happen.
Iron ore production is dominated by Vale, BHP Billiton and Rio Tinto.
BHP said in recent months that the pricing system could evolve further to an even more spot-based mechanism, while Vale chief executive Roger Agnelli last month said the new system will make prices less volatile and the market needs time to adjust to the move away from benchmark.
"We think we will need time to consolidate the new quarterly price mechanism," Mr Agnelli said. "Clients are adjusting to it, so let's give it time."
Iron ore prices on the spot market rose to a record high around $US186 a tonne in April, about the time of the pricing change, and are currently around $US158/ton.
Steelmakers are critics of the pricing change and the dominance the three major miners have on the market. They say high prices threaten margins and make contracts with customers such as car manufacturers difficult to set, given the more frequent iron ore price changes.