The iron ore prices are very likely to double this year with the new Quarterly Pricing System, which will provide more price volatility due to the spot price market. Very interesting update from March 30th is that there is now an agreement between the top iron ore miners like Vale of Brazil and BHP Billiton of Australia and Japanese and Chinese steel companies that the 40-year old iron ore benchmark system which meant that prices will be done once a year has now been done away with and from now onwards iron ore prices will be decided on a quarterly basis, and that’ the starting of iron ore spot price market.
For those who are not aware, iron ore is the second largest traded commodity in volume terms after oil.So it’s a very large market but without its own index as of now and we believe that this decision is a very major step for a very strong rise in the iron ore prices in the coming quarters and also coming years because a spot price means that the market is going to mature and that the iron ore miners will have much better negotiation power ongoing from now onwards. Continue reading
According to media reports, major iron ore exporters, including BHP Billiton and Rio Tinto, have reached a preliminary agreement to move away from annual contract pricing to quarterly arrangements.
The short term iron ire pricing contracts would be linked to the iron ore spot price, which would see iron ore prices more than double from the present $US 60 per ton top $US 130 per ton or more.
The Financial Times London reported unknown company executives as confirming the move away from annual pricing agreements. If the new system evolves, it will in fact mirror the quarterly pricing arrangement BHP won earlier this month for coking coal with customers in Japan, Europe and Korea. That saw BHP Billiton win price rises of 55% for hard coking coal, the best quality coal there is for the steel industry.
The FT said in its report that “The miners, including Vale of Brazil and UK-based BHP Billiton and Rio Tinto and steelmakers such as Nippon Steel, JFE, Sumitomo Metals and Kobe still need to resolve significant obstacles to reach a final agreement”. Continue reading