Mr Jose Carlos Martins ferrous metals director of Vale said that quarterly pricing for iron ore will probably stay in place in the long term despite discussions of a move to a monthly system.

Mr Martins said that the quarterly system will help reduce price volatility, though ultimately the market will decide on the best system. He said that "We need a system that can cope with the volatility. I believe that the quarterly price can cope with that and will help to reduce volatility.”

Mr Martins said that "I think the quarterly system will stay but the answer will be given by the market."

Mr Martin further said that "I believe that iron prices will be sustainable in the range of 90 to 100 dollars per tonne in the long-term.”

After spiking earlier this year toward USD 180 per tonne, spot prices fell below quarterly prices, which could create strains similar to those that plagued the decades old annual pricing system. Analysts said that volatility in iron prices could push the mining industry toward monthly pricing only months after it abruptly abandoned the annual benchmark system.

The mismatch between the spot price, which recently fell toward USD 120 and quarterly contracts, which are close to USD 140 per tonne, could allow speculators to build up stocks when spot prices are low and then buy on quarterly contracts when prices go back up.

Chinese buyers did this in the wake of the 2008 financial crisis with the benchmark system and the spot market, leaving miners selling cheap ore at benchmark prices to clients that often stockpiled it and resold it with a mark-up on the spot market.

(Sourced from Reuters)