IMO we would be trading above $1.20 without the BHP offer and...

IMO we would be trading above $1.20 without the BHP offer and with the proposed investment by CRM....




Different ore price for China

November 03, 2009
Article from: The Australian

RIO Tinto says iron ore sales to China could be priced differently to other markets from next year and that it is confident about better prices from the Asian giant and continuing Chinese economic growth.

Rio Tinto iron ore chief Sam Walsh said China might seek to purchase iron ore at a different price to other markets next year.

"It is a situation that is evolving," Mr Walsh told an investor conference in Sydney.

"Any number of scenarios could relate to an outcome in 2010, with one scenario being a different pricing mechanism in China to the rest of the world," he said.

A rise in iron ore benchmark prices would be a turnaround after the 33 per cent fall this year, which was caused by the collapse in commodity prices.

The spot price has risen from lows of about $US60 per tonne mid-year to about $US90 per tonne.

Mr Walsh said his company would talk to China's largest steel producer Baosteel and the China Iron & Steel Association but warned they would struggle if they wanted a benchmark deal more favourable than that of competitors.

"We will need to hear directly from Baosteel and CISA on what is their view in relation to prices," Mr Walsh said.

"Certainly if there is any tinge of unfairness in relation to what is being structured, it would make benchmark negotiations very difficult."

Rio Tinto and other major iron ore producers failed this year in a bid to get Chinese steel mills to agree to a benchmark price for iron ore.

Chinese mills were seeking a better deal than competitors elsewhere to reflect their dominance in the market.

Mr Walsh also talked up prospects for good prices next year. "In terms of the spot price for iron ore, which we all watch daily or hourly, there is strength in that and we are seeing that the spot price has risen from lows of about $US60 per tonne mid-year to prices of about $US90 per tonne," Mr Walsh told the investor conference yesterday.

"The market is showing quite a bit of strength currently. We are expecting that will flow through into next year."

Rio Tinto also told investors about the hurdles it faced in finalising its huge proposed iron ore joint venture with BHP Billiton in Western Australia.

Mr Walsh said there were 14 work groups looking at integrating and planning activities relating to the $US116 billion joint venture.

He said work continued on merging accounting and human resources systems, but much of the work relating to costs and expansions was not possible without regulatory approval.

Authorities in Europe and elsewhere need to sign off on the joint venture partnership.

Rio Tinto chief executive Tom Albanese told investors that the tie-up would not reduce competition.

"We will each get a chunk of tonnes and we will still compete head-to-head, each of us with that chunk of tonnes," Mr Albanese said.

UBS head of resources research Glyn Lawcock told AAP the tone of the presentation to investors yesterday was not bullish on the iron ore agreement.

"The regulatory agencies are limiting factors," Dr Lawcock said.

Rio Tinto and BHP Billiton expect to have signed a final agreement on their joint venture plan by December 5.