Rio Tinto blames iron ore price fall on rival Vale

Tue Oct 25, 2011

* Vale shipments to China to blame for soft market - Rio ore chief
* Says move is only a blip, China market fundamentals strong
* Iron ore price down 19 pct this month

PERTH, Oct 25 (Reuters) - World No. 2 iron ore producer Rio Tinto cited a strategy by bigger rival Vale to divert European shipments to China for a dramatic softening in market prices.

Rio's iron ore division head and Australian chief executive Sam Walsh said a move by Vale to ship more to China had not caused Rio to curb its own iron ore production runs, which are running at full capacity.

"The softening in iron ore prices relates to Vale shipping material that was destined for Europe into China," Walsh told a business forum in Perth on Tuesday.

Spot iron ore prices have shed 19 percent so far this month in a sell-off largely fueled by slower construction steel demand in China.

China is the world's biggest customer of imported iron ore, accounting for around 400 million tonnes annually.

In Europe, a more important market for Vale than Rio, steel markets have fallen under a cloud of doubt given its debt crisis.

Growth of Europe's steel production will slow in 2012 along with activity in the steel-using sectors, Eurofer, the European steel producers association has forecast.

Spot iron ore prices on Tuesday fell nearly 4 percent. It was the biggest single-day drop since August 2009 as thin demand from China forced some traders to sell at a loss.

"Traders who can't hold positions because they don't have sufficient funding are selling at a loss of $40-$45 a tonne," said a Singapore-based iron ore trader.

Despite price falls, all three mega-producers including Rio are ramping up production.

"My business is shipping flat out," Walsh said. "We are producing at record rates."

Walsh downplayed the lasting effect of Vale's strategy.

"There's a limit to what they can physically ship," Walsh later told Reuters on the side of the forum. "We're not overly concerned about that."

He said Rio remains confident in the long-term drivers of economic growth and iron ore demand in China.

In the short term, the market was worried about the European crisis, but it was not having a direct impact on Rio's operations, he said.

"The issue is contagion. It's perception, it's fears," he said. "When you look at the fundamentals of China, India, South Asia, North Asia, we find it's very robust."

Vale, the largest of the three top producers, reluctantly discarded the once-a-year-price system in 2010 only after BHP Billiton and Rio bowed out, cognisant it would upset customers. In the end it had no choice but to follow suit.

Now, with spot prices trailing the last quarter's average price mark and lead times on Brazilian cargoes to China much longer than the Australian miners, Vale has announced it is open to alternative pricing systems.

Some analysts have interpreted this as paramount to Vale offering discounted iron ore to boost sales.

sourced Retuers

Chinese mills offered better Q4 iron ore pricing options

Saturday, 15 Oct 2011

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)

Chinese steel industry profit hit by surging iron ore prices

Monday, 21 Feb 2011

It is reported that China steel industry suffered a lot from the continuous increasing imported iron ore prices in the past 2010 realizing CNY 89.7 billion with the sales and profits ration hitting at 2.91% which was much lower than the 6.2% averaged level of national industrial enterprises.

Among the surveyed steel enterprises, most of them gained slight profits or posted profit losses in 2010 which mainly caused by the continuous hiking output costs.

Chinese imported iron ore prices eyed a growth of 61% to USD 145 per tonne in the close of 2010 from the USD 90 per tonne in Jan on average. As calculated, the full-year averaged ore prices were up by USD 40 per tonne to USD 128 per tonne from one year ago, so the total output costs hiked by nearly CNY 196 billion pushing China large and medium enterprises' production costs to grow up by 30.7%YoY.

In 2010, China crude steel output came at 626.65 million tonnes up by 53 million tonnes increase of 9.3%YoY including the key enterprises output accounted for 86.2% of the total volume up by 4.2%YoY.

(Sourced:www.caing.com)

Tags: ore prices, China crude steel output, import export data