Liberum predicts Rio and BHP will gain a 95 per cent price rise.
A Macquarie Group analyst, Jim Lennon, told clients yesterday that China's "traders and steel mills are still expecting a further iron ore price increase due to the ongoing iron ore negotiations between Australian suppliers and Chinese steel mills". ---------
Rio, BHP near price deal with Chinese steelmakers
* Jamie Freed * June 3, 2008 *
CHINESE steelmakers expect to reach agreement with Rio Tinto and BHP Billiton by the end of the month on the benchmark price of iron ore.
This comes amid growing expectations that the miners will succeed in their demand for a freight premium.
The chairman of the China Iron & Steel Association, Zhang Xiaogang, yesterday said the outcome should benefit the interests of both sides.
Iron ore buyers want to settle a price by June 30 to avoid triggering a contract clause that would allow BHP and Rio to sell their ore at the higher spot price. If the price is settled by then, it will be backdated to April 1, the start of the Japanese financial year.
This year, Brazil's Vale won a rise of at least 65 per cent from Asian mills. Rio and BHP have been holding out for a bigger gain, arguing that they deserve a higher price because Australia is closer to China than Brazil.
An analyst at Liberum Capital, Michael Rawlinson, said he had discussed the talks with Rio's iron ore chief executive, Sam Walsh, last week. . "It is very clear [Rio] are confident of achieving a result this year in clawing back some of the freight differential in their contract settlements," he said, adding that other industry sources had indicated a settlement was likely in June.
Liberum predicts Rio and BHP will gain a 95 per cent price rise.
A Macquarie Group analyst, Jim Lennon, told clients yesterday that China's "traders and steel mills are still expecting a further iron ore price increase due to the ongoing iron ore negotiations between Australian suppliers and Chinese steel mills".
BHP and Rio declined to comment on the state of the talks.
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