Australian miner Rio Tinto is in no hurry to conclude annual iron ore contract negotiations because of market volatility, Anthony Loo, the company's managing director -- China & Asia -- was confirmed as saying by a London spokesman. The negotiations are ongoing however, the spokesman added.

 

The immediate market environment is not conducive to iron ore miners securing high contract prices. Spot prices -- which are likely to have a strong bearing on the outcome of the contract talks -- have fallen by $8.5/dmt in the last week on poor demand from China. Platts iron ore reference price for 62% Fe fines imported into China fell to $72.5/dmt CFR North China Friday, from $80.5/dmt a week earlier.

 

Chinese steelmakers say miners will probably wait until the market improves. "Australian ore suppliers are waiting for the steel markets to recover so that they will be in a better position to refuse Chinese steel mills' demands for a significant drop in [iron ore] benchmark prices," a source a China's Baosteel told Platts Friday.

 

But the question as to whether the markets will indeed improve remains. "Drawing the negotiations out may not be such a good thing for the miners," a banking source told Platts Friday. "We lowered our forward curve by $10/dmt over the last two weeks. The markets are feeling soft. There is a lack of buying," he added. The bank offers forward iron ore swaps stretching 18 months into the future.

 

Pointing out that iron ore contract negotiations are rarely straightforward, the banking source also said: "I wonder how much of this is gamesmanship. These talks were never going to be quick." –Platts