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Wednesday, July 27, 2011

Iron ore price negotiations - FMG backs drive to monthly iron ore pricing

Wednesday, 27 Jul 2011

Australia's third largest iron ore miner Fortescue Metals backed a drive led by larger rivals BHP Billiton and Rio Tinto to introduce monthly pricing for international sales, saying it would add transparency and benefit buyers and sellers.

Mr Neville Power CEO of Fortescue told Reuters that "The shorter the pricing, the greater the transparency adding that if pricing did go monthly industry-wide, it would be a positive outcome."

Most iron ore is sold three months forward based on the average price over the previous three months, in itself a shift from once a year price setting, which BHP Billiton and Rio Tinto had criticised as outdated and inefficient.

Fortescue one of several iron ore miners in Australia pushing up production to meet strong projected demand for the steel making raw material in Asia, would not comment directly on Fortescue's current pricing formula.

BHP Billiton last year drove the move away from annual pricing settlements to quarterly pricing after spot prices rose above the then annual price.

This prompted steep falls in some steelmaker profits as they struggled to pass on suddenly higher costs to customers.

But iron ore miners countered that the shorter pricing would benefit buyers if prices fell.

(Sourced from Reuters)

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