Found this report dated yesterday from the Telegraph UK.
Rio Tinto and BHP Billiton start tense talks with China over iron-ore demand Mining groups Rio Tinto and BHP Billiton have started tense discussions with China over iron-ore pricing after requesting a 40pc rise in the benchmark price from Japan and South Korea.
By Garry White Published: 7:30AM GMT 04 Feb 2010
Last year's talks ended in failure, with no price agreed and four of Rio Tinto's negotiating team arrested on corporate espionage charges. All of these men, including Australian national Stern Hu, are waiting to see if they are charged with offences under Chinese law
However, representatives of the two mining companies have met Chinese officials in Singapore to open this year's talks, according to the China Times newspaper.
Iron ore benchmark prices come into force on April 1 each year, but large mining groups are believed to want to sell more of their ore on shorter-term contracts, or at the spot price.
It is believed that Chinese authorities want a special "China price" which is at discount to other steel mills in the region. However, after the collapse of discussions in 2009, the country's steel mills ended up paying the price agreed with steel producers in Japan or had to make purchases at the much higher spot price.
With demand for iron ore increasing in the country, Chinese officials are making an early start on the talks, which are likely to be protracted and difficult. Last year, steel production in China rose 14pc to a record 568m tonnes, according to the National Bureau of Statistics.
Demand for iron ore meant the spot price has soared over the past few months, peaking at $135 a tonne. The price has eased to $126 a tonne at the start of this week, with some analysts believing it could fall to $120. However, this about double the benchmark price agreed last year of $60.4 a tonne.
Last year the China Iron and Steel Association said that it thought miners would be looking for an increase in the benchmark price of 20pc to 30pc, but called this "unacceptable".
"I think 40pc sounds like a reasonable figure to me," a Chinese commodity trader told Reuters, noting that the figures being suggested on both sides were within expectations. "But of course the steel mills will say they can't accept more than 30pc because that is part of the negotiation process," he added.
BHP Billiton recently said that it had sold 46pc of its ore in the final quarter of 2009 on short-term contracts. This is a mixture of the spot price, quarterly agreed prices and hybrids of the two.
BHP and Rio have entered in a joint venture in their adjacent iron ore operation in the Pilbara region of Western Australia to share costs, although they are marketing their product separately.
Both Rio Tinto and BHP declined to comment on the pricing talks.
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