The world's number one iron ore producer Vale is considering shifting from iron ore pricing based on the previous quarter’s prices to levels more aligned with the spot price the company's chief executive said on Tuesday.
The Brazilian company's new willingness comes after more Chinese steel mills seek to postpone shipments or default on contracts as spot iron ore prices drop from historic highs above $170 to levels of around $150. BHP, Vale and Rio Tinto control nearly 70% of the 1 billion tonne annual iron ore seaborne trade and dominate price talks which in the past were characterized by secretive negotiations and annual contracts.
A market source on Monday told Reuters that Vale (NYSE:VALE) could eliminate a clause in its quarterly contracts such that steel makers could buy ore slightly cheaper.
MINING.com reported last week global number one miner BHP Billiton (ASX:BHP) plans to create a new, more transparent system for pricing iron ore called Global Ore by the end of the year or early next year.
Despite the recent slump in prices MINING.com reported at the end of September the big 3 iron ore miners see no China weakness and believe iron ore imports could climb 60% to 1 billion tonnes.
The situation today marks a dramatice shift in the dynamic between iron ore producers and Chinese steel mills. At the end of August MINING.com reported iron ore miners were calling the shots as China steelmakers' profits melted away.