12/03/2008 - 14:05

Rio chief says new iron ore pricing system on the way

12/03/2008 - 14:05

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Rio Tinto Iron Ore chief executive Sam Walsh believes the current benchmark pricing system for iron ore will come to an end but it will not be happening anytime soon.

Rio chief says new iron ore pricing system on the way

Rio Tinto Iron Ore chief executive Sam Walsh believes the current benchmark pricing system for iron ore will come to an end but it will not be happening anytime soon.

Mr Walsh told delegates at an iron ore conference in Perth today that any change to a new iron ore pricing system would be gradual.

"A competitor has indicated their wish to move to an index system, which sounds very much like moving to a computerised spot system but it may have some aspect of futures built into it," Mr Walsh said.

"I expect that at a time that yes the pricing system for iron ore will change, I expect that it would be a gradual change, I don't see the iron ore industry or the steel industry rushing to an LME based system with futures and everything else associated with it

"I suspect that it would be a slow, progressive change."

The current pricing system is set when one of the iron ore giants, Rio, BHP Billiton or Brazil's Vale, comes to an agreement with a customer and a benchmark is set.

So far only Vale has completed negotiations with its customers over pricing, however BHP and Rio have yet to settle with the latter announcing it would take a more vigorous approach to negotiations in the wake of BHP's takeover offer.

The bulk of Rio's iron ore contracts are currently set at benchmark price while some are hybrid contracts.

Late last year, Rio announced it intended to sell 15 million tonnes of ore onto the spot market this year.

 

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