Portman Wants to Keep Annual Iron Ore Contract Talks

July 7, 2008

July 7th (Bloomberg) – Portman Ltd., Australia’s third-largest iron-ore mining company, wants to retain annual pricing talks for long-term contracts, rejecting a push by BHP Billiton Ltd. for a flexible index system.

“Long term supply contracts and benchmark prices go hand in hand,” Richard Mehan, managing director of Perth-based Portman said in an interview. “I’ve never been totally sure of how this index is supposed to work and I’d like to think of benchmark prices being around in the future.”

BHP Billiton, the world’s largest mining company, wants contract iron ore to be linked to higher spot prices. Chinese steelmakers, the world’s largest consumer of the material, said mining companies should take into account long-term relationships in setting prices.

Iron ore prices have gained almost fourfold since 2001 to a record because of China’s rising demand. BHP won an increase of as much as 97 percent in contract prices this year.

Portman mines ore in Western Australia and sells 75 percent of its annual production of 10 million metric tons to mills in China, including Baosteel Group Corp.

“Our customers in China want a lot more than we can provide them with,” Mehan said in Perth on July 4. Portman is controlled by U.S.-based Cleveland-Cliffs Inc.

Portman fell 4 cents, or 0.3 percent, to A$16.10 at the 4:10 p.m. Sydney time close on the Australian stock exchange. It has gained 53 percent this year compared with a 21 percent decline on the benchmark index.

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