FT reported that Vale defended itself against Chinese accusations that its iron ore prices are too high, saying that supply and demand are fixing prices not the big iron ore miners.
Mr Roger Agnelli CEO of Vale said that "Vale is not fixing prices, who is fixing the prices is the market."
Mr Agnelli said that contract iron ore prices for the third quarter of this year would be set automatically by a formula based on the average of prices from the second quarter.
Mr Agnelli and Mr Carlos Martins Vale's ferrous minerals chief refused to be drawn on what the new price might be. Mr Martin said that the increase is based on the published price, it is very transparent. If you want to buy, you buy if you don't want to buy, don't buy.
Mr Martins making clear that there will be no return to the annual benchmark pricing system. In the long term, the iron ore price will be fixed in the same way.
Vale privately expressed concern that Chinese steel mills might default on their iron ore contracts if spot market prices fall below quarterly prices. Chinese steel mills were accused of defaulting on their annual contracts in the H2 of 2008 when spot prices fell below contract prices for the first time as a result of the global financial crisis.
Mr Martins said that "It's a possibility but I hope they are not going to do it, because we have contracts we have a long-term commitment - and long-term commitment has to be for both sides."
Steelmakers and Chinese officials have repeatedly complained about the concentration of power in the world iron ore market in the hands of three big producers, which also include Rio Tinto and BHP Billiton. The dispute has ramifications for the global economy as iron ore prices feed through to steel prices, impacting the price of every day goods.
Steelmakers were forced to accept 90% to 100% increase in iron ore prices in the Q2 after the annual benchmark system of pricing broke down.
Mr Ekkehard Schulz CEO of ThyssenKrupp recently warned about a speculative bubble in raw materials prices that could even be larger than the real estate problem in the US two years ago.
(Sourced from Financial Times)
