Rio Tinto Group and BHP Billiton Ltd., the world’s second- and third-largest iron ore exporters, may raise contract prices about 7 percent in the first quarter of 2011, according to Metal Bulletin pricing.
Quarterly prices are based on the three-month average of indexes provided by Metal Bulletin, Platts and the Steel Index with a one-month lag period. The price of 62 percent iron ore arriving at Qingdao port averaged $145.95 a metric ton, including shipping, from Sept. 1 to Nov. 25, compared with $136.51 in the previous three months, according to Metal Bulletin.
Rio, BHP and Rio De Janeiro-based Vale SA, the biggest iron ore supplier, abandoned annual pricing this year in favor of quarterly agreements as spot prices rose. Steelmakers in China, the world’s biggest iron ore buyer, need to raise prices to pass on higher raw-material costs as demand slows in winter.
“Steelmakers will face pressure from higher costs and eroding profits in the first quarter,” Xu Xiangchun, chief analyst with Mysteel Research Institute, said in an interview. “Winter is a slow season for steel consumption as construction work in northern China normally will be suspended.”
Gervase Green, a spokesman for Rio’s iron ore unit, declined to comment when contacted today. Amanda Buckley, a spokeswoman for BHP, weren’t available.
BHP gained 0.3 percent to close at A$43.20, and Rio was up 1.2 percent at A$84.04 on the Australian stock exchange. Baoshan Iron & Steel Co., China’s biggest listed steelmaker, fell 0.9 percent to 6.42 yuan as of 2:02 p.m. local time in Shanghai.
Contract iron ore prices almost doubled in the April quarter and gained more than 20 percent in the July-to-September period before falling 13 percent in the following three months.
Steel Index Price
First-quarter prices may increase about 7.7 percent, according to data compiled by the Steel Index, which tracks 62 percent-iron content ore arriving at China’s Tianjin Port. The average price has risen to $149.081 a ton for the period from Sept. 1 through Nov. 25, compared with $138.377 in the previous three months.
Most Chinese customers use Platts indexes as a price guide, according to Jose Carlos Martins, Vale’s executive director of iron ore.
Steel prices in China have risen as much as 14 percent from July after the government limited power supplies to mills and also because of expectations that inflation may quicken.
The People’s Bank of China said yesterday it will strengthen liquidity management and “normalize” monetary conditions, reinforcing forecasts for higher interest rates to tame inflation. China has raised rates, told banks to hold more funds in reserve and pledged price controls if needed.