Vale Sees Iron Ore Price Stable for 2-3 Months
OREANDA-NEWS. December 9, 2011. Brazilian miner Vale SA (VALE, VALE5.BR) says iron ore market prices will stay stable for the next two to three months, but could then start to rise.
The rainy season which is now beginning in
Spot market iron ore prices for delivery into
Prices rebounded to USD
More than half of Vale's iron ore contracts now reflect the actual average price for the current quarter, which is about 20% below the price calculated under the previous system, which was based on a "lagged" average quarterly price, Martins said.
Martins said that this explains reports that Taiwanese steelmaker China Steel Corp (CISEY, 2002.TW) has obtained a 20% cut in iron ore prices this quarter, as the Asian firm is moving to the new contract system.
Vale is in negotiations with steelmaker ArcelorMittal (MT, MT.AE), the world's largest steelmaker and Vale's single biggest customer, over the switching to the new pricing contracts, the executive said.
Around 20% of Vale's sales are still on the old quarterly "lagged" system, including customers in
According to the director, the new iron ore pricing system, which is closer to spot market pricing, means the market has had to sacrifice the predictability it enjoyed with the previous annual benchmark and quarterly contract systems.
"It's a tough negotiation but we're really flexible," Martins said. However, customers which opt to move to the new pricing system based on current market price averages won't have the option to switch back if market conditions change, he said.
Some analysts have said steelmakers may be tempted by the new system because iron ore prices have been falling, but companies could be in for a shock if ore prices start to rise again.
"It's a one-way ticket--if you go for it you can't come back," he said.