UPDATE 1-Iron price system unlikely to change soon-Vale
* Ore pricing system won't change soon, Martins says
* Says volatility remains impediment to any changes
* Sees prices between $120-$180 a tonne through 2014
By Gustavo Bonato
SAO PAULO, June 27 (Reuters) - Changes in the pricing system for iron ore are unlikely so long as the market remains volatile, a senior executive at the world's top producer of the mineral said, signaling that miners will resist pressure from steelmakers to settle supply contracts for longer periods.
"So long as this price volatility persists, it is really hard to implement pricing systems for longer periods of time," said José Carlos Martins, head of ferrous minerals at Brazil's Vale. Such volatility is caused by Chinese clients' efforts to bargain-hunt for the mineral "all the time."
Martins' remarks expose the fragility of different pricing schemes for the mineral, which is hampering profitability for global steel mills given wild price swings.
The 2008 financial crisis caused the global steel sector, led by Chinese mills, to jump ship on the annual contract system to take advantage of falling spot market prices for iron ore. Vale followed its Australian rivals Rio Tinto and BHP Billiton to price iron ore on a quarterly and eventually monthly or spot market system.
Martins also predicted that prices for the mineral are likely to range between $120 and $180 a tonne for the next two years.
His predictions came within findings by a recent Thomson Reuters poll, which put average prices for the benchmark 62-percent grade iron ore, including freight cost for delivery to China, at $149 a tonne by the fourth quarter.
Sluggish Chinese steel demand during the first half of the year had curbed mills' appetite for iron ore, forcing some producers to defer deliveries of cargoes from miners including top supplier Vale.
- Tweet this
- Share this
- Digg this