Australian Iron Ore Firms Demand Price Hike

June 9, 2008

June 9th (Digital Chosunilbo) – The world’s number two and three iron ore suppliers, Australia’s Rio Tinto and BHP Billiton, have demanded a 100 percent price hike this year from East Asian buyers including POSCO, Nippon Steel and Baoshan Iron & Steel. That is much higher than the 65 percent hike the steelmakers agreed to in February with Brazil’s Vale, the world’s number one iron ore producer.

According to POSCO and Chinese media, price negotiations have been stalemated since March on the Australian suppliers’ demand of $20 more than the price agreed to with Vale (around $75 per ton).

The iron ore buyers of South Korea, Japan and China settle on a price with suppliers at the beginning of every year for implementation from April 1. The Australian partners are demanding a freight premium, saying they should get a higher price since it is cheaper to transport ore from their country to Asia than from Brazil. It costs $100 to ship one ton of iron ore from Brazil to Asia, and $40 from Australia to Asia.

The two Australian firms together control 40 percent of the global iron ore market. POSCO said, “If we agree on the price demanded by the Australians, Vale will protest. This is the dilemma that has stalled negotiations for four months.” Rio Tinto Korea said it had no comment on the negotiations.

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