Business.smh reported that Cliffs Natural Resources, the US miner that owns the former Portman Mining iron ore mines in Western Australia, is now selling all of those mines’ ore to China under contracts at the benchmark price rather than on the spot market as it increases production to a record level.

Cliffs said Chinese customers are paying the same benchmark price as Japanese and Korean customers were paying Rio Tinto and BHP Billiton down by 33% on last year’s price for fines and a 44% fall for lump on a provisional basis. That leaves room for an adjustment in price should China strike a different benchmark, but it means the sales will not be conducted at the spot market price which has reached USD 100 a tonne including shipping.

Mr Joseph Carrabba who heads Cliffs said his company’s customers were quite comfortable’ with the benchmark pricing system. He said that “Not everybody, particularly the smaller customers that we deal with, really wants the variability of indexed pricing.”

Mr Carrabba said Cliffs expected to ship a record 8.5 million tonnes from its West Australian mines this year, up from an earlier estimate of 8 million tonnes due to ‘encouraging sales activity. He said it would cost USD 45 to USD 55 a tonne to produce iron ore at Cliffs’ West Australian mines, compared with an expected selling price of USD 60 to USD 65 a tonne.

Cliffs is Australia’s fourth largest iron ore miner, behind Rio, BHP and Fortescue Metals. The company also owns 45% of the Sonoma coking coal mine in Queensland.

(Sourced from Business.smh)