October 07, 2008

Iron ore price negotiations – Rio sees pellet hike as favorable

Rio Tinto Ltd, which is locked in tense iron ore price negotiations with Asian steel mills, said that recent sharp rise in iron pellet prices achieved by Vale would not go unnoticed.

Mr Gervase Greene spokesman of Rio iron ore division said "This result indicates just how strong the market is at the moment and not just for pellet prices but for iron ore products in general. It is a good indicator which will not go unnoticed."

Morgan Stanley in a client note said that "We believe most investors expected pellet price increases to be equal to or less than the 65% to 71% increase on iron ore fines announced in February, and this news could come as a surprise to the market.’

Vale announced on Wednesday that it secured an 86.67% increase in pellet prices for 2008 from Italian steelmaker Ilva as compared with a 65% to 71% hike negotiated recently for its non palletized iron ore. Vale said Ilva had agreed to pay USD 2.202 per unit for pellets shipped from Vale's port in Tubarao.