Monday, February 15, 2010

BHP (NYSE:BBL), Vale (NYSE: VALE), Iron Ore Contracts

BHP Billiton, Vale, Rio Tinto Iron Ore Prices

According to BHP Billiton (NYSE:BBL) CEO Marius Kloppers, “The market price (for iron ore) is what the benchmark price is supposed to be.” Kloppers added that the benchmark today is about twice what it was last year. Vale (NYSE: VALE) concurs, wanting to see iron ore prices at the annual level reflect spot market levels.

The contentiousness of negotiations between China and BHP Billiton, Vale and Rio Tinto have continued from last year, with the producers expected to want up to 50 percent in annual increases, trying to move away from the benchmark system of pricing.

So far there has been some temporary agreements between some Chinese steelmakers and BHP for a 40 percent in contracted iron ore prices.

With steel prices not rising as quickly as iron ore, it's thought that could decrease the amount the producers are looking for, although the demand and supply factor is again in play this year, which could even temper that scenario.

One way or the other, China as a strong demand for iron ore, and if they want it they're going to have to be willing to pay for it.

Kloppers also made an interesting insight in that he believes that steel production in China will continue to rise in demand over the next 20 years, seeming to signify a bull market in iron ore and steel for some time to come.

“We did a bottom-up analysis, how many buildings, what is the steel

intensity and so on and we think that this trend is going to go on for

the 20 years that we’ve forecast,” he said.

BHP Billiton, Vale, Rio Tinto Iron Ore Prices

No comments: