rio insists the ore price is right Surely the chinese will bend...

rio insists the ore price is right Surely the chinese will bend over...after all Japan, Korea, Taiwan, and Europe already agreed with the 19% price adjustment..... :)))

Rio insists the ore price is right
Barry FitzGerald
June 13, 2006

GLOBAL iron ore heavyweights have stepped up the pressure on China to fall into line with the rest of the steel-making world and to accept a 19 per cent rise in contract prices for shipments of the key steel-making raw material in 2006-07.

Pilbara producer Rio Tinto turned up the heat yesterday, saying that global demand for iron ore was now stronger than when protracted price negotiations with the reluctant Chinese steel industry began six months ago.

Rio managing director Leigh Clifford said increased buying by Japan, South Korea and Taiwan had fuelled the stronger demand and that global supplies of ore remained vulnerable to disruptions.

"Only one disruption can create a real shortage," Mr Clifford told Bloomberg in Singapore.

Last week the Brazilian iron ore giant Companhia Vale do Rio Doce (CVRD) said the new global benchmark for a 19 per cent price rise had been set in other markets and that the Chinese industry had no choice but to follow suit.

CVRD's executive director of iron ore, Jose Carlos Martins, said the Chinese "needed to understand that this price [increase] is a reasonable price based on the market conditions". "We are waiting on the last word from the Chinese," he said. "But the number is there [19 per cent]."

Last month the third force among the iron ore exporters, BHP Billiton, forecast that the market would "remain tight for some time yet" as supply continued to struggle to catch up with the China-led surge in demand.

CVRD effectively set the benchmark price for 2006-07 when it settled on a 19 per cent price increase with Germany's Thyssen in mid-May. The increase in US dollar contract prices followed on from last year's massive 72 per cent price increase and prompted a howl of protest from the Chinese industry, the world's biggest importer.

The Chinese have yet to acknowledge the new benchmark price and, among other things, have threatened to ban imports at the new and higher price.

Elsewhere, reports in Indonesia suggest Rio could receive government approval for the $US2 billion ($2.7 billion) development of its La Sampala laterite nickel project in September.

Rio has said an "order of magnitude" study in La Sampala had been completed. It has listed the project as one of its "future growth options".