slow down in china, page-17

source: UBS daily email, DYOR please. thx.

plans a "significant" increase in spot market sales next year, a senior executive told Reuters on Thursday. Under the traditional benchmark system, steelmakers and big iron ore miners agree on an annual price rise. However, due to the price swings in the spot market and volatile freight rates, the system has lost its grip on the market. "We're not planning to place more tonnes on the traditional long-term contract basis," Sam Walsh, chief executive of Rio Tinto Iron Ore, told Reuters in an interview. "We are looking at hybrid contracts or spot-based contracts going forward." Under the hybrid system, the contracts have long time periods but the prices are renegotiated at more frequent intervals compared to the annual traditional contracts. Rio has already sold 5Mt of iron ore on the spot market last year and has said it plans another 15Mt this year. "The (total) spot market is around 450Mt a year. Up to 15Mt is relatively modest. I believe that the market could absorb a greater quantity from us," he said. Walsh said although the construction sector in China has slowed down and some steel mills shut down to avoid pollution during the Olympics, demand for iron ore remained robust. "The fundamentals driving steel production like urbanisation are still continuing," he said, adding he expected a pick-up in activity in October.