China Daily reported that Anglo Australian miner Rio Tinto Plc had no intention of pricing its iron ore on a monthly basis, as most of the Chinese steel mills have accepted the third quarter rates.
Mr Tom Albanese CEO of Rio Tinto said that "At this point in time, the Chinese mills are ok with the quarterly pricing mechanism. There is less tension in our negotiations with the mills."
Mr Albanese said that the quarterly pricing system has proved satisfactory and is a compromise between the annual and spot rates. He added that "We''re pleased that we continued to price iron ore on a quarterly basis during the period."
Mr Albanese said that theoretically, over time, the quarterly pricing should represent the average of spot rates, and smooth out the highs and lows of fluctuations. At the same time miners are further improving the process to ensure that there are no blips.
Commenting on the reports that the company is considering monthly pricing for iron ore, Mr Albanese said that Rio has not yet implemented the scheme. He added that "I hope the Chalco agreement represents a strong level of progress in our relations with the Chinese government and Chinalco."
It may be noted that the world''s top three iron miners, including Brazil''s Vale SA, Australia''s Rio Tinto and BHP Billiton, abandoned the annual benchmarking system for iron ore this March and instead opted for quarterly contracts, regardless of the stiff opposition from buyers.
The annual contracts posed problems for the industry, while the spot rates are not exactly an indicator of future prices. Spot prices of iron ore fell below the quarterly rates in June and July, prompting buyers to turn to the spot markets for raw materials.