BHP Billiton signs short-term deals with Asian clients

10:18, March 30, 2010      

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A large number of Asian clients have agreed to sign short-term iron ore sales contracts with Australian mining conglomerate BHP Billiton, according to an announcement made by the company on March 30, 2010.

Previously sale price was determined on an annual basis, but frequent market fluctuations are pushing companies to adopt a new model. BHP Billiton said that these agreements represent a large part of the company's sales of iron ore.

The statement did not disclose the list of contracted clients in Asia, nor details such as price, contract duration or the amount of procurement.

In accordance with iron ore negotiation tradition, April 1 will be start date for ore prices of another year. After any ore company signs a contract with clients, all other contracts are determined using the first contract as a guideline. However, in 2009, negotiations were deadlocked until May. This year, customers in China still have not reached any agreement. This announcement represents a victory for the three major mining companies in the 2010 annual iron ore negotiations.

BHP Billiton has taken the lead to turn the pricing of commodities including iron ore and coking coal from an annual basis to a quarterly basis and spot price. Company representatives say they believe short-term pricing is more transparent. In previous negotiations on the coke, BHP Billiton reached a short-term contract with Japanese customers. This breaks with the tradition of an annual pricing model that has lasted for several decades.

Chinese steel enterprises oppose a short-term pricing model, saying that this leads to more uncertainty. However, after the three mining giants delayed reaching long-term agreement with China last year, and with the soaring iron ore spot prices this year, these mining giants insist on promoting the short-term pricing model. They also propose an average price increase of 90 to 100 percent, hoping the price to be able to close with the spot market.

By People's Daily Online
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