friday outlook, page-8

Interesting battle going on in Iron Ore contract negotiations - sounds like the Chinese are driving a hard bargain. The last few years all negotiating power has been with the miners, tables have turned though with the Chinese now holding the upper hand. Should be an interesting few months, and will be a big fundamental determinant of the price performance of BHP/RIO over the next few months.


11:40 20Feb09 RTRS-UPDATE 1-Rio postpones China iron ore talks -report
(Adds quote, detail, background)
BEIJING, Feb 20 (Reuters) - Rio Tinto has postponed annual iron ore price negotiations with Chinese steel mills, Rio's China managing director Anthony Loo was quoted on Friday as saying.
"We want to wait for a while to monitor the market situation," Loo told Caijing magazine. "We hope conditions will be more normal after a few months, allowing for better negotiation with our Chinese customers."
The negotiations on benchmark iron ore prices normally end before April 1.
"Last year the iron ore talks only concluded at the end of May. And there's still some time until the end of May, so we certainly want to wait a little bit and examine the changing market situation before making any decisions," Loo said.
Last week Rio Tinto, the world's third-biggest producer of iron ore, agreed to a $19.5 billion investment by Chinese metals conglomerate Chinalco, the top shareholder in the Anglo-Australian miner.
That investment, which needs the approval of Rio's shareholders, is likely to affect the annual iron ore negotiations, in which Rio and the other two big miners, Vale and BHP Billiton , set benchmark prices with Chinese steel mills, analysts have said.
The investment would leave Chinalco with a 15 percent interest in Rio's Hamersley iron ore deposit in Australia. But Loo said Rio's sales team would still control sales from the deposit.