SAO PAULO, Sept 10 (Reuters) - Roger Agnelli, the chief executive of Brazilian iron ore miner Vale VALE5.SA(RIO.N), said on Wednesday the company’s current price negotiations with Asian steel mills would not take effect until 2009.
Vale, the world’s largest iron ore miner, confirmed on Tuesday that it was in negotiations with Asian mills to raise its term prices to bring them in line with what European mills were paying for its ore.
Stepping back from a pack of reporters into an elevator at an industry event in Sao Paulo, Agnelli responded to a question about when the price increases would take effect, “It’s all for next year.”
A Vale spokesman was unable to comment further on the executive’s remark about the timing of the price increase.
Vale said it was seeking to increase prices for Asian clients in line with those charged to European steelmakers, which currently pay 11 percent to 11.5 percent more, depending on the grade of iron ore.
“Today it doesn’t make sense to have the Asian market price ... We are already talking with companies that we have contracts with,” Agnelli said.
Sources from major Asian steel mills said in the past days that Vale was attempting to impose a term price increase halfway through the typical annually contract cycle, which would be a break with protocol in the long-standing benchmark price-setting system.
In the benchmark system, the first major iron ore miner and steel mill to agree on a price for the year are followed by the rest of the industry.
This year was different, however, after Australian miners Rio Tinto (RIO.L) and BHP Billiton BLT.L secured a better prices than Vale from Chinese mills based on the cheaper freight costs compared with shipping from Brazil.
But freight costs have fallen by half from May-June .BADI and Vale may not feel the discount allowed to the more distant Asian mills was defensible.
Since reports started circulating last week that Vale was demanding a price increase, steelmakers in China, Japan and South Korea have declined to comment. But sources at some Chinese mills told Reuters last week that they planned to rebuff the price increase. See [ID:nL4201159].
Vale shares were up 6 percent at 35.35 reais in afternoon trade in Sao Paulo, following a general rise on the local Bovespa stock index .BVSP. (Reporting by Vanessa Stelzer; Writing by Reese Ewing; editing by Lisa Shumaker)