Iron ore negotiations or indefinite extension BHP Billiton pushes index pricing

Recently, mining giant Rio Tinto said it would reject the iron ore price reduction proposed by Chinese steel companies by more than 40%, while other major international suppliers also said that the Chinese price reduction requirements will not be compromised. The reporter learned from reliable sources yesterday that BHP Billiton, one of the world’s three major ore suppliers, has little interest in the negotiations of the Chang Association. Not only that, but they also insist on the index pricing that was proposed and advocated before. Industry insiders said that due to the struggle of the parties, the negotiation time this year will drag on for a longer time.

BHP Billiton pushes index pricing. A person familiar with the matter told reporters that BHP Billiton had already lost interest in the long exchange price. “It’s not possible to talk about it.” The source said that BHP Billiton has always advocated Index pricing, if the long-term agreement price is cancelled, is in line with its intention to follow market pricing.

By convention, iron ore negotiations generally ended on April 1, but negotiations this year have been delayed. Analysts believe that an important reason for the delay in negotiations this year is that in the 2008 iron ore negotiations, multiple principles of the traditional benchmark pricing mechanism were broken, so the pricing mechanism needs to be discussed this year.

According to industry insiders, according to the index pricing method proposed by BHP Billiton, the price of the iron ore procurement contract is not determined when the supplier and the buyer sign the contract. The final price is in accordance with the goods. The average price of the index for the 5 working days before arrival is determined; the index price is CIF, including sea freight. The reason for BHP Billiton to push index pricing is that this pricing method can reflect market changes in a timely manner and is therefore more reasonable.

However, this proposal was immediately opposed by the Chinese side. Shan Shanghua, secretary general of the China Iron and Steel Association, said in an interview that China cannot accept index pricing because Index pricing essentially means that steel mills have promised long-term purchases to iron ore exporters, but not a certain price. As a result, steel mills importing iron ore bear all market risks.

But BHP Billiton believes that index pricing has long been prevalent in oil and coal industries, eliminating long-term co-prices, allowing market demand to determine price increases in line with economic laws. .

Rio Tinto and Vale have not responded yet. However, for the proposal of index price, the other two iron ore producers did not respond. Yesterday, the reporter sent to Power Extension Co., Ltd., the company’s spokesperson answered this newspaper, because there is no detailed content of the index price, it is difficult to publish an evaluation. Zhu Kai, president of Vale China, made it clear that Vale still insists on using the benchmark price system as the basis for iron ore pricing.

Li Xinchuang, an authoritative expert in the steel industry and executive vice president of the China Metallurgical Industry Planning Institute, said in an interview with the newspaper yesterday that the long exchange price was The basic iron ore negotiation mechanism is no longer suitable for China’s national conditions, but he does not agree with index pricing. “We can’t solve all problems simply by an index. The key depends on whether this method is fair and reasonable, and whether it can stabilize multiple interests. If these problems can be solved and accepted by steel companies, this model will be realized.”

The ore negotiation is difficult in the short term. In fact, since the beginning of the long association, the iron ore negotiation supplier has been adopting various methods to “resist” China. Price reduction behavior. In addition to BHP Billiton’s promotion of the iron ore index pricing mechanism, Vale previously said that if the price could not be agreed, “it will withdraw from the negotiations.” Both BHP Billiton and Rio Tinto said they would not accept prices below the current spot price.

On Friday, Sam Wilsh, head of iron ore operations at Rio Tinto, said at an analyst meeting that he strongly disagreed The steel producer’s request to reduce the benchmark contract price from 2009 to 2010 by more than 40% based on the current spot price, and claimed that if the price is not agreed before June 30, Rio Tinto will terminate the contract.

According to the investigation of the reporter, the current inventory of iron ore in China’s ports is 70 million tons, which is twice the normal monthly demand level. Therefore, Chinese steel enterprises can guarantee two Not imported for a month.

But for the Chinese market, several major iron ore suppliers are optimistic, and some companies have made it clear that they have a lot of orders and can’t sell them. Versh previously told the media that although steel demand is still sluggish today, Rio Tinto’s annual production capacity has remained at a full load of 200 million tons.

And for the optimism expressed by Rio Tinto, the relevant data of the Chinese market in recent months seems to have also given a positive response. According to the latest statistics released by the General Administration of Customs, China imported 46.74 million tons of iron ore in February, an increase of 43% from 32.65 million tons in January. So far this year, the import volume of iron ore has increased by 6% year-on-year to 79.39 million tons, and the monthly import volume in February hit a record high.

Despite the various opinions on the pricing mechanism, some insiders said that it seems certain that iron ore negotiations will not have results in a short period of time, and may even Extended indefinitely.

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