Tue Oct 18, 2011
* Spot price fall likely to bring price model scrutiny
* Vale not planning to abandon current pricing formula
BRASILIA, Oct 18 (Reuters) - Brazilian miner Vale is open to discussing different iron ore pricing systems with its clients, the company's chief executive said on Tuesday, as a tumble in the price of ore has led to pressure from steel mills for more flexibility.
Vale has told Chinese steelmakers it will give them options to buy the raw material cheaper, sources told Reuters last week, as spot prices for iron ore have dropped below the quarterly contract system created last year.
"Vale has a pricing formula, but if someone wants to buy under different terms we are open to discussion," Vale CEO Murilo Ferreira said, adding however that the company had no plans to abandon its current quarterly pricing model.
The willingness to negotiate suggests a changing dynamic between steel mills and miners, which now find themselves facing weaker demand due to stagnant growth in the United States and a sharp economic downturn in Europe.
But Ferreira said that demand in China, which posted slower economic growth of 9.1 percent in the past quarter, remains firm.
A market source on Monday told Reuters that Vale could eliminate a clause in its quarterly contracts such that steel makers could buy ore slightly cheaper.
Ore with 62 percent iron content fell to $150.30 a tonne on Tuesday, down $3.10 from the previous day, amid worries about slowing growth in China and the global economy.
Mining companies in 2010 created a quarterly system for iron ore that replaced the aging benchmark system, one based on annual talks between miners and steel mills.
The quarterly iron contracts are based on the average of spot prices over a three-month period ending a month before the start of each quarter.
(sourced Reuters)
* Spot price fall likely to bring price model scrutiny
* Vale not planning to abandon current pricing formula
BRASILIA, Oct 18 (Reuters) - Brazilian miner Vale is open to discussing different iron ore pricing systems with its clients, the company's chief executive said on Tuesday, as a tumble in the price of ore has led to pressure from steel mills for more flexibility.
Vale has told Chinese steelmakers it will give them options to buy the raw material cheaper, sources told Reuters last week, as spot prices for iron ore have dropped below the quarterly contract system created last year.
"Vale has a pricing formula, but if someone wants to buy under different terms we are open to discussion," Vale CEO Murilo Ferreira said, adding however that the company had no plans to abandon its current quarterly pricing model.
The willingness to negotiate suggests a changing dynamic between steel mills and miners, which now find themselves facing weaker demand due to stagnant growth in the United States and a sharp economic downturn in Europe.
But Ferreira said that demand in China, which posted slower economic growth of 9.1 percent in the past quarter, remains firm.
A market source on Monday told Reuters that Vale could eliminate a clause in its quarterly contracts such that steel makers could buy ore slightly cheaper.
Ore with 62 percent iron content fell to $150.30 a tonne on Tuesday, down $3.10 from the previous day, amid worries about slowing growth in China and the global economy.
Mining companies in 2010 created a quarterly system for iron ore that replaced the aging benchmark system, one based on annual talks between miners and steel mills.
The quarterly iron contracts are based on the average of spot prices over a three-month period ending a month before the start of each quarter.
(sourced Reuters)
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