Time to redo the analyst reports.. looks like the numbers will be big. Under the new agreement, Rio will sell Pilbara Blend Fines/Yandicoogina Fines to Baosteel for $144.66 US cents per dry metric tonne unit.
Pilbara Blend Lump will cost 201.69 US cents per dry metric tonne unit
Rio Tinto clinches 85% lift for iron ore
THE industrial sector of the Australian sharemarket is in the grips of a bear market, but in the resources sector the "stronger for longer" commodity price scenario that China is underpinning continues to persuade players that a bird in the hand is better than two in the bush.
In a stronger for longer scenario, resources security is the name of the game, for miners and their customers, and yesterday there were examples from both sides.
From London last night came reports that Rio Tinto had secured an increase of up to 96.5% for contracted iron ore this year, and an average 85% increase.
The new contracts include for the first time an implied premium, of $US7.45 a tonne, to take into account the relatively lower cost of shipping ore from the Pilbara to Asia than from the other big iron ore producing nation, Brazil.
The deal China's steel mills have struck with Rio will almost certainly be followed by a similar one with Rio's suitor, BHP Billiton, which will have to deal with Rio's news in a briefing on iron ore and other steel-making materials today.
Rio's deal came as existing contracts threatened to expire on June 30, forcing the mills to buy iron ore at significantly higher prices on the open market. Their need for resources security was, in the end, greater than their ability to stare Rio down.
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