June 30, the deadline for iron ore long-term contract, while the negotiation between China side and the three mining giants has no outcome. Based on China side strong attitude towards more reduction, Rio Tinto, the global second largest iron ore producer, said on June 30 that most supplying contract will be transferred to spot pricing from July 1.
The annual iron ore long-term contract pricing mechanism as conventions has been followed by buyers and sellers for 40 years around. This pricing method has firstly presented crack last year, but this year it is going to disappear. Rio Tinto, as the representative of buyers, firstly has not signed contract with most customers before June 30 for 20 years.
Gervase Greene, the spokesman of Rio Tinto revealed that it has been supporting long-term contract pricing mechanism for long time, but if customers choose to buy iron ore on spot market, it will conform to the requirement of customers.
Jpmorgan published forecast last month that to give up annual long-term contract pricing mechanism will add the fluctuation of benefit for Rio Tinto. However, Rio Tinto disclosed on June 1 that its half iron ore was sold on spot market.
China surpassed Japan in 2003, became the largest iron ore consumer. Prior to this, every year’s iron ore long-term contract price is set by Japan and European steel enterprises. In the fiscal year of 2007, China as the leading buyer firstly conclude a 9.5% cut with the Vale.
For more information please visit
www.chinametalbiz.com
