BHP Billiton Australia has decided to implement a monthly pricing mechanism for most of its iron ore exports since 2011, which has changed the previous global quarterly pricing system.
An iron ore digger who asked not to be named said that the iron ore that India sells to China is also priced by monthly or short-term contracts, thus taking advantage of the price increase caused by the increased demand for iron ore, iron. Ore is the main component of steelmaking.
Since the economic crisis has gradually recovered, the global demand for steel has risen, mostly from emerging markets like China. Increased demand will help strengthen the status of iron ore producers and enable them to negotiate new terms of sale.
An analyst at an international bank in Brazil said that BHP Billiton has been looking for a more flexible pricing system for some time. “It is looking for market transparency,†the analyst said. “We know that it is delivered in 5-10 days, but in fact it is based on spot or day. Therefore, its sales reflect the price changes. â€
During the global financial crisis, the iron ore annual pricing benchmark system was disintegrated in mining and steel manufacturers for 40 years, and the discussion on the monthly iron ore pricing mechanism began last year. However, since April 2010, the world's three major iron ore suppliers (Renew Valley, BHP Billiton, Rio Tinto) and steel manufacturers have chosen to implement a quarterly pricing system.
Since then, quarterly pricing and market pricing have gradually produced a mismatch, and the rapid rise in market prices is due to the improvement of the market. This has led some miners to seek monthly pricing, which is closer to the spot price, which helps to reduce price distortions.
Antonio Lannes, economic affairs manager at the Brazilian Iron Ore Export Council, said, “Monthly pricing allows miners to raise prices faster in the bull market.†“However, customers are more inclined to quarterly contracts, which can provide them more Time to plan."
The biggest problem surrounding the quarterly pricing system is that there is a four-month time interval on the price, just as the current quarterly price is based on the spot market price from September to November 2010.
Lannes said, "The current price of iron ore has risen to almost $170 per ton, but the contract price has remained at around $142."
In a report to consumers, Goldman Sachs said in Tuesday that iron ore prices will continue to rise as the steel industry gradually gets out of the economic crisis. However, the current supply of iron ore has been affected by the recent bad weather conditions in Australia and Brazil, while the export ban on iron ore in Karnataka, India is aimed at ensuring local iron ore supply.
Prior to Dow Jones Newswires, BHP Billiton officials in London and The Hague did not comment on the company's 2011 iron ore pricing system.
Brazilian miners Vale said through their news department that they will continue to support the quarterly pricing system. Since the introduction of the quarterly pricing system, Vale has tripled its profit in the third quarter of 2010. This is because the introduction of this pricing system has caused iron ore prices to rise by 130% year-on-year.
However, in the fourth quarter, contract pricing began to decline due to volatility from the previous quarter.
The London business magazine "Financial Herald" said that last year China's fourth and fifth largest steelmakers - Wuhan Iron and Steel and Shagang Group, have worked with Australian suppliers to develop a monthly pricing system for iron ore purchases.
An iron ore digger who asked not to be named said that the iron ore that India sells to China is also priced by monthly or short-term contracts, thus taking advantage of the price increase caused by the increased demand for iron ore, iron. Ore is the main component of steelmaking.
Since the economic crisis has gradually recovered, the global demand for steel has risen, mostly from emerging markets like China. Increased demand will help strengthen the status of iron ore producers and enable them to negotiate new terms of sale.
An analyst at an international bank in Brazil said that BHP Billiton has been looking for a more flexible pricing system for some time. “It is looking for market transparency,†the analyst said. “We know that it is delivered in 5-10 days, but in fact it is based on spot or day. Therefore, its sales reflect the price changes. â€
During the global financial crisis, the iron ore annual pricing benchmark system was disintegrated in mining and steel manufacturers for 40 years, and the discussion on the monthly iron ore pricing mechanism began last year. However, since April 2010, the world's three major iron ore suppliers (Renew Valley, BHP Billiton, Rio Tinto) and steel manufacturers have chosen to implement a quarterly pricing system.
Since then, quarterly pricing and market pricing have gradually produced a mismatch, and the rapid rise in market prices is due to the improvement of the market. This has led some miners to seek monthly pricing, which is closer to the spot price, which helps to reduce price distortions.
Antonio Lannes, economic affairs manager at the Brazilian Iron Ore Export Council, said, “Monthly pricing allows miners to raise prices faster in the bull market.†“However, customers are more inclined to quarterly contracts, which can provide them more Time to plan."
The biggest problem surrounding the quarterly pricing system is that there is a four-month time interval on the price, just as the current quarterly price is based on the spot market price from September to November 2010.
Lannes said, "The current price of iron ore has risen to almost $170 per ton, but the contract price has remained at around $142."
In a report to consumers, Goldman Sachs said in Tuesday that iron ore prices will continue to rise as the steel industry gradually gets out of the economic crisis. However, the current supply of iron ore has been affected by the recent bad weather conditions in Australia and Brazil, while the export ban on iron ore in Karnataka, India is aimed at ensuring local iron ore supply.
Prior to Dow Jones Newswires, BHP Billiton officials in London and The Hague did not comment on the company's 2011 iron ore pricing system.
Brazilian miners Vale said through their news department that they will continue to support the quarterly pricing system. Since the introduction of the quarterly pricing system, Vale has tripled its profit in the third quarter of 2010. This is because the introduction of this pricing system has caused iron ore prices to rise by 130% year-on-year.
However, in the fourth quarter, contract pricing began to decline due to volatility from the previous quarter.
The London business magazine "Financial Herald" said that last year China's fourth and fifth largest steelmakers - Wuhan Iron and Steel and Shagang Group, have worked with Australian suppliers to develop a monthly pricing system for iron ore purchases.
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