BHP Billiton Ltd the world’s biggest mining company said it expects a shift toward monthly pricing agreements for iron ore which better reflect the market and the needs of producers and consumers.
Mr Mike Henry president of marketing at the Melbourne based company said that “We expect there will be continued progress toward shorter term monthly pricing. Shorter term pricing will ultimately be the truest reflection of underlying supply and demand fundamentals.”
Mr Ian Roper a commodities strategist at CLSA Ltd in Shanghai said that “BHP has been at the forefront of these changes. While steel mills don’t like volatility they can cope when prices for raw materials and steel “move in unity.”
Mr Shan Shanghua general secretary of the China Iron and Steel Association said that mining companies and steelmakers should seek a better pricing system, Pricing iron ore based on indexes doesn’t accurately reflect the Chinese market.
Vale SA, Rio Tinto Plc and BHP, the three biggest exporters of iron ore, this year abandoned a 40 year custom of setting prices annually in favor of quarterly contracts. A further shift to monthly contracts by BHP contrasts with comments from rivals at Brazil’s Vale and London based Rio this week.