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Vale tipped to increase iron ore prices by 86%
Last Updated(Beijing Time):2008-09-05 11:47

Brazil's Vale, which offers cheaper iron ore to Chinese steel makers than BHP Billiton and Rio Tinto, wants to lift its prices to match what Australian mines have won.

Sources from Chinese steel companies confirmed yesterday they had been notified by Vale via e-mail that a price rise was imminent.

UK-based industry online publication Steel Business Briefing (SBB) reported on Wednesday night that Vale was seeking 20 percent more from the 2008 benchmark iron ore prices it originally agreed upon in February.

In response, Rio de Janeiro-based Vale said yesterday that "it does not confirm rumors circulating in the market today regarding a price adjustment of 20 percent for iron ore."

"Vale hereby reinforces that, as part of its ongoing business, it is constantly in dialogue with clients aiming to reach satisfactory mutual conditions for commercial contracts, involving among other factors, quality, volumes and time for delivery," the company said'

Chinese industry sources said Vale had threatened to delay shipments or deliver ore with lower iron contents, if the requests for a price rise could not be met.

Some smaller mills said they had not received requests for a price rise.

Vale is asking for US$1.3441 per dry metric ton iron ore unit for its South System fines starting September, up 86 percent from a year earlier. This compares to an increase of 71 percent it originally agreed for the year starting April. It also seeks a 92 percent rise for Carajas ore fines from the initial 65 percent increase.

"Vale has not hid its displeasure that Australian iron ore miners achieved an average 85 percent increase in late June for their lump and fine ore, based on the Chinese finally agreeing to pay a freight premium," SBB said, adding that Vale also believed its ore was of a higher quality than Australian ore.

Mysteel.com's Wang Jianhua said Vale was trying to get better positioned for the 2009/10 price negotiations which officially start in November. But other analysts said the timing seemed strange given China's softening ore market.

Officials at China Iron and Steel Association and Baosteel Group Corp, which on behalf of major Chinese mills takes part in annual negotiations, declined to comment on how the domestic industry would react to Vale's request.


Source:Shanghai Daily 
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