Corporates 1: BHP, ALZ, VBA
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It doesn't mean much yet, but BHP Billiton is slowly changing the global iron ore trade, even though it's the third biggest producer behind Rio Tinto and Vale of Brazil.In a statement to the ASX yesterday, BHP revealed that & #160;23% of its iron ore sales this financial year will be sold at a 33% discount to last year's prices and about one-third will be sold based on a mix of different pricing systems.The 33% would be the contracts BHP has struck with steel mills in Japan, South Korea and Taiwan. & quot;Negotiations for the remaining 47 percent of iron-ore volumes are ongoing, & quot; BHP said & #160;in a statement to the ASX.BHP normally doesn't comment on pricing or contracts while negotiations are going on: it revealed the Japanese and other settlements only after they had been struck.The comments seem to be suggesting to hold out Chinese buyers, that BHP is succeeding in its campaign to break down the fixed pricing system. Seven Chinese steel mills are said to be among those already settled.It said around 30% will be sold on a mix of quarterly negotiated pricing, spot market and index-based pricing, the statement said.China, the biggest buyer of the raw material, wants a discount of as much as 45%, more than the 33% cut agreed to by Japanese and Korean steelmakers.BHP did not say which of its customers would be using the different pricing mechanisms.But with the Chinese contracts uncompleted, it would be logical to assume that they would be involved.But there have also been reports that & #160;some Chinese mills have provisionally settled contracts, with new price talks or a rollover arrangement & #160;at the end of September. Media reports said several Chinese mills were in the group to have already settled, but don't want to be identified. & #160;Rio has reached similar agreements with Japanese, South Korean and Taiwanese mills and said it & #160;around 50% of first half sales were on the spot market.Spot prices have been rising and are currently over & #160; & #36;US90 a tonne, including freight ex the North Western Australian coast. & #160;BHP Billiton said the current settlements were indicative of continued progress towards transparent market pricing.BHP shares fell 59 cents to & #36;37.43 yesterday
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Daniel Kertcher established Platinum Pursuits in 2001 as a vehicle in which to share his knowledge of strategies to use the financial markets to grow wealth, with the aim of achieving financial freedom by making your money work for you.
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