Reuters reported that a number of Chinese steel mills have been given the option to buy iron ore for the fourth quarter based on October to December spot rates instead of a common industry practice to buy on prices based on previous months.
Three mill sources briefed on the change told Reuters that miners, such as Vale SA have offered Chinese mills' the option to pay for fourth quarter supplies based on more current rates following the recent tumble in ore prices.
A source with one of China mid sized steel mills said "We received a letter from Vale asking us for our opinion of changing fourth quarter pricing to be based on October-December spot rates."
The spokeswoman at Vale was not immediately available for comment.
Reuters reported on Thursday that Chinese mills were seeking to postpone shipments or renegotiate fourth-quarter iron ore contracts.
Currently, prices for quarterly contracts are generally based on the average index prices over a three-month period ending a month before the start of each quarter. That means that prices for the fourth quarter would normally have been based on average spot prices from June to August when prices were higher than now.
(sourced from Reuters)