Well it looks like we could getting close to the chinese...

Well it looks like we could getting close to the chinese stumping up some cash if the provisional price is up 40%, the final price might be much higher, making AXO look even better for Hebei/MCC.

BHP, China Agree 40% Provisional Ore Price Gain, Analyst Says
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Feb. 12 (Bloomberg) -- BHP Billiton Ltd., the worlds biggest mining company, and some Chinese steelmakers have agreed to a provisional 40 percent increase in contract iron-ore prices, said UC361.com analyst Hu Kai, citing the mills.

Final benchmark contract-price agreements for the year may still be settled first by Japanese mills and the ore producers, Hu said in a phone interview, without naming any of the mills. Some of the annual Chinese contracts start from Jan. 1, he said.

Talks to set 2010 benchmark prices have begun between mills and suppliers including BHP and Rio Tinto Group, the China Iron & Steel Association said this week. Baosteel Group Corp. and Rio have named new negotiators, signaling the mills and miners want to start afresh after failing to agree on prices last year.

The steelmakers were asked either to accept the provisional price gain, or indexed pricing, UC361.coms Hu said. BHP said last month it sold 46 percent of its first-half ore cargoes from Western Australia through a mix of cash, quarterly and index pricing.

Wang Liqun, chief negotiator for Baosteel Group, which represents Chinese steelmakers in annual iron-ore talks, declined to comment. Shan Shanghua, general secretary of China Iron & Steel Association, couldnt be reached by Bloomberg News. BHP spokesman Samantha Evans declined to comment when contacted by Bloomberg News.

The four-decade annual pricing system was fractured last year after Rio, BHP and Vale SA, who account for three-quarters of traded iron ore, refused to meet Chinas demand to cut prices by more than 33 percent during the global recession.

Five Largest

Chinas five largest steelmakers proposed to one of the worlds top three suppliers that they pay a provisional 40 percent more for contract iron ore than a year ago, UBS AG said today, citing a Platts report. An agreement may have been reached, said UBS, citing the Platts report.

A 40 percent gain in contract prices would see the price of Australian ore rise to about $84 a metric ton, from about $60 a ton. The cash price, including freight and insurance, was at $128.20 yesterday, according to The Steel Index.

Vale SA, the worlds biggest iron-ore producer, expects to win contract prices this year that reflect a soaring spot market as Chinese demand surges. The spot market is the best indicator of where contract prices are heading, BHP Chief Executive Officer Marius Kloppers said this week.

We were left in no doubt that BHP would be looking for a 90 percent iron-ore price rise for a 12 month contract, Goldman Sachs JBWere Pty analysts, led by Neil Goodwill, said Feb. 10.

Chinas monthly iron-ore imports fell 25 percent to 46.6 million tons in January, the second-lowest since January 2009, according to the general customs data, signaling slowing demand.

The slowdown in iron-ore shipments could be repeated this month because of the Lunar New Year holiday, which runs through next week, Goldman Sachs JBWere said in a Feb. 10 report. Evidence of lower import demand could strengthen Chinas negotiation position for 2010 benchmark prices, it said.

--Helen Yuan. Editors: Keith Gosman, Indranil Ghosh

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To contact the Bloomberg News Staff on this story: Helen Yuan in Shanghai at [email protected]

Last Updated: February 12, 2010 00:45 EST