March 14, 2008 MetalBiz - On Mar. 12, Rio Tinto iron ore chief executive Sam Walsh denoted on the AJM Global Iron Ore & Steel Forecast Conference that the spot market is rewarding the enterprises without long-term contracts. Rio Tinto can achieve returns for shareholders if the buyers admit raising surcharge fees.
According to the international iron ore negotiations conventions, other suppliers and buyers would accept the outcome after an applier agrees on the pact with the buyers. However, the Australian iron ore suppliers ¡.e. Rio Tinto and BHPB haven't agreed on the prices reached by Brazil CVRD.
Some analysis said that Sam Walsh`s opinions showing Rio Tinto wants to increase more chips by spot supply in the iron ore negotiations to put pressures on steel enterprises.
The insiders denoted that the iron ore buyers including Japan and Europe can choose to accept the CIF price or at least 90% of supplying amounts according to the contract stipulated during current iron ore negotiation. Currently, the suppliers still can supply the long-term iron ore supply of 10% to spot market even if the buyers agrees on the CIF price. Consequently, the buyers can only strive for reasons during the negotiation; otherwise, they can`t gain any benefits by making concessions. Moreover, changing current negotiations` conventions would affect the later negotiations.
"It is the second time for Rio Tinto to push forward the spot goods theory. Earlier in the end of last year, Rio Tinto announced to triple the iron ore selling amounts of 15 million tons in the spot market in 2008, 10% of Rio Tinto`s total production in 2008."
Presently, the steel enterprises in Japan and Europe are negotiating with two Australian iron ore suppliers, which proves the buyers` unwilling to accept the CIF mode proposed by suppliers. The insiders indicated that the iron ore freight hasn`t reached to more than US $70 dollars per ton under the long-term charter contract. Reportedly, Baosteel`s iron ore freight from Australia to China is only more than US $10 dollars per ton.
China Iron & Steel Association (CISA) executive president Luo Bingsheng said that it will be favorable to establish a long-term and stable relationship for both the iron ore buyers and suppliers for the specific property of iron ore.
Zhang Xiaogang of CISA disclosed that the main discrepancy during current negotiation is that: the suppliers ask for taking the freight fee into the negotiation terms so as to share freight fees, while China doesn`t agree on it.
Additionally, the Sino-Australian negotiation has been in stalemate, Rio Tinto iron ore executive Sam Walsh denoted that Rio Tinto, mainly depends on long-term contracts, can create deserved rewards for shareholders if Rio Tinto can get shipping freight subsidies.
Currently, the spot price of iron ore is higher than future price, and Rio Tinto has considerable future supply. Hence, there is the news of giving rewards to those producers without signing long-term contracts. According to the conventions, the iron ore price should be settled on FOB price excluding shipping freight. However, Rio Tinto wants to settle the price at the CIF price and obtain part shipping freight subsidies, for which the iron ore negotiation is in deadlock.
China doesn't agree on Rio Tinto's new iron ore pricing system
March 14, 2008 MetalBiz - On Mar. 12, Rio Tinto iron ore chief executive Sam Walsh denoted on the AJM Global Iron Ore & Steel Forecast Conference that the spot market is rewarding the enterprises without long-term contracts. Rio Tinto can achieve returns for shareholders if the buyers admit raising surcharge fees.
According to the international iron ore negotiations conventions, other suppliers and buyers would accept the outcome after an applier agrees on the pact with the buyers. However, the Australian iron ore suppliers ¡.e. Rio Tinto and BHPB haven't agreed on the prices reached by Brazil CVRD.
Some analysis said that Sam Walsh`s opinions showing Rio Tinto wants to increase more chips by spot supply in the iron ore negotiations to put pressures on steel enterprises.
The insiders denoted that the iron ore buyers including Japan and Europe can choose to accept the CIF price or at least 90% of supplying amounts according to the contract stipulated during current iron ore negotiation. Currently, the suppliers still can supply the long-term iron ore supply of 10% to spot market even if the buyers agrees on the CIF price. Consequently, the buyers can only strive for reasons during the negotiation; otherwise, they can`t gain any benefits by making concessions. Moreover, changing current negotiations` conventions would affect the later negotiations.
"It is the second time for Rio Tinto to push forward the spot goods theory. Earlier in the end of last year, Rio Tinto announced to triple the iron ore selling amounts of 15 million tons in the spot market in 2008, 10% of Rio Tinto`s total production in 2008."
Presently, the steel enterprises in Japan and Europe are negotiating with two Australian iron ore suppliers, which proves the buyers` unwilling to accept the CIF mode proposed by suppliers. The insiders indicated that the iron ore freight hasn`t reached to more than US $70 dollars per ton under the long-term charter contract. Reportedly, Baosteel`s iron ore freight from Australia to China is only more than US $10 dollars per ton.
China Iron & Steel Association (CISA) executive president Luo Bingsheng said that it will be favorable to establish a long-term and stable relationship for both the iron ore buyers and suppliers for the specific property of iron ore.
Zhang Xiaogang of CISA disclosed that the main discrepancy during current negotiation is that: the suppliers ask for taking the freight fee into the negotiation terms so as to share freight fees, while China doesn`t agree on it.
Additionally, the Sino-Australian negotiation has been in stalemate, Rio Tinto iron ore executive Sam Walsh denoted that Rio Tinto, mainly depends on long-term contracts, can create deserved rewards for shareholders if Rio Tinto can get shipping freight subsidies.
Currently, the spot price of iron ore is higher than future price, and Rio Tinto has considerable future supply. Hence, there is the news of giving rewards to those producers without signing long-term contracts. According to the conventions, the iron ore price should be settled on FOB price excluding shipping freight. However, Rio Tinto wants to settle the price at the CIF price and obtain part shipping freight subsidies, for which the iron ore negotiation is in deadlock.
http://www.metalbiz.com.cn/ ■