Given that the new iron ore prices are the second highest...

Given that the new iron ore prices are the second highest ever

Doom and gloom is a little over done I think

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Rio settles iron ore prices 33% lower

Tuesday, 26 May 2009
Kristie Batten

RIO Tinto has reached an agreement with Nippon Steel Corporation that will see the miner sell fines at 33% lower and lump at just over 44% lower.

Under the new agreement, Pilbara blend fines and Yandicoogina fines will now be priced at US97c (A125c) per dry metric tonne unit, a reduction of 32.9%, while Pilbara lump blend will be priced at US112c/dmtu, 44.4% lower than last year’s prices.

The new prices are for Hamersley iron ore deliveries for the contract year beginning April 1, 2009.

Rio Tinto Iron Ore chief executive Sam Walsh said the company was pleased to reach an agreement with Japan’s leading steelmaker.

“We believe this is a realistic outcome for both parties – one that reflects the global market for iron ore and the current challenging market conditions facing our customers,” he said.

The new price equates to around $US62 per tonne for fines and $US72/t for lump.

Last year’s iron ore price contracts were settled at 145c for fines and 202c for lump, a record increase of 79.8% and 96.5% respectively.

Analysts have been speculating price drops of between 20-50% as steel demand weakens in the face of the global economic downturn.

There has been mounting speculation that iron ore miners and steelmakers would abandon the iron ore benchmark system but analysts from Macquarie Bank last week forecast that an iron ore benchmark price would be set this year, but mainly for Chinese buyers.

It is uncertain if Rio and the other iron ore majors, BHP Billiton and Brazil’s Vale, have finalised iron ore pricing with Chinese customers and if those prices will reflect those set with Nippon.

Chinese steel mills are reportedly pushing for cuts of 40-50%.