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UPDATE: Ore Miners Put China Term Price Talks On Hold-Source

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(Adds context, comments from a second source.)

 
   By Chuin-Wei Yap 
   Of DOW JONES NEWSWIRES 
 

BEIJING -(Dow Jones)- Global iron ore miners have put annual iron ore benchmark pricing talks with China on hold, a steel industry executive told Dow Jones Newswires Friday.

The move spells greater stress for the annual benchmark pricing system, which pits global miners against their Asian customers each year to set a single price for bulk iron ore shipments. Some industry sources, however, note such moves could just be negotiating tactics.

During the term discussions, Brazil's Vale S.A. (VALE) had pushed for a 90% increase in the 2010 benchmark price in a verbal notice to Chinese negotiators, though the proposal wasn't put in writing, said the senior-level executive, who didn't wish to be named.

The new contract year begins April 1, but price negotiations have dragged on well past that deadline in recent years.

Talks have halted between Vale and Chinese negotiators because Vale's price was too high, the executive added. A local media report Thursday said Vale pulled out because China's proposed price was too low.

Anglo-Australian miners Rio Tinto Ltd. (RTP) and BHP Billiton Ltd. (BHP) have also put the talks on hold, according to the executive.

A reading of Rio Tinto's movements provides a signal to observers that the Anglo-Australian miner hasn't interacted with China to a meaningful degree during this year's talks, a second source said Friday.

While media reports have focused on demands made by Vale and BHP, little has been said about what Rio Tinto wanted, the source said.

That suggested a low level of interaction, and speculation that Rio Tinto and Chinese negotiators had met in other countries for talks didn't turn out to be true, the source said.

Miners are making a push this year to move benchmark pricing closer to the spot price, which at $138 a metric ton Friday, is double of last year's benchmark price.

Earlier in the week, BHP said it had succeeded in pricing a large portion of its coking coal contracts on a quarterly basis with Japanese steelmakers, marking a significant shift from the annual benchmark system and signaling a further blow to the iron ore term pricing format.

Vale declined comment Thursday, though a spokeswoman pointed Dow Jones to official comments on the price talks, given on Feb. 11 during an investor call on the company's 2009 financial results.

Departing from longstanding support for the decades-old benchmark system, Jose Carlos Martins, Vale's director for ferrous metals, had at the time said the Brazilian giant would back changes to the annual pricing format.

The China Iron and Steel Association, one of the leaders for China in the talks, didn't respond to a call for comment while BHP couldn't be reached immediately for comment Friday.

Earlier in the day, Reuters quoted an unnamed source with knowledge of the talks as saying Vale had proposed to Japanese steel mills a shift to a quarterly pricing system. The proposal was made Thursday, the report said.

When contacted by Dow Jones, officials at Japan's Nippon Steel and JFE Holdings declined to comment of the Reuters report.

 

-By Chuin-Wei Yap, Dow Jones Newswires; 8610 8400 7704; chuin-wei.yap@dowjones.com.

 

(END) Dow Jones Newswires

March 12, 2010 00:38 ET (05:38 GMT)

Copyright (c) 2010 Dow Jones & Company, Inc.

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