Rio shifts to quarterly iron ore pricing

Rio shifts to quarterly iron ore pricing. Rio Tinto Ltd has moved to abandon a 40-year old annual iron ore pricing system and begun talks for quarterly negotiated contracts. The world's second largest iron ore producer is following similar arrangements unveiled recently by Brazil's Vale - the world's biggest iron ore miner - and BHP Billiton Ltd, which is ranked third. "Rio Tinto is currently negotiating contracts with its customers to supply iron ore priced on a quarterly basis," Rio Tinto said in a statement on Friday. "As discussions are still underway, no further guidance is possible at this stage." The mining giant's position "reflects the recent structural shift in the iron ore market away from benchmark pricing" Rio Tinto chief executive of iron ore and Australia Sam Walsh said in the statement. "It is in line with our recent comments that benchmark pricing only works if it reflects market fundamentals, otherwise the system would need to change." At a conference in Perth last month, Mr Walsh reflected on the growing "wide disparity" between the benchmark system and the spot market. "That is not sustainable," he said at the time. "The benchmark system does have to evolve. "Whether it evolves to a quarterly system or some other mechanism, time will actually tell." Magnetite iron ore pellet producer Grange Resources Ltd on Friday said it was finalising quarterly index-based pricing arrangements with its major shareholder and main customer, China's Jiangsu Shagang Group Co Ltd. Jiangsu Shagang is China's largest privately owned steelmaker. Perth-based Grange said it had secured an interim price increase of 69 per cent for iron ore pellets. It said it expected that the final average price it received in 2010 would be between 80 per cent and 120 per cent higher than 2009 prices. "Once we have final agreement, the revenue from pellets sales after 1 April 2010 will be backdated to reflect the new arrangements," Grange chief executive Russell Clark said. Last month, BHP Billiton agreed with a large number of its Asian-based customers to move to shorter-term iron ore contracts after reaching a similar agreement with its coking coal customers. On April 1, Vale confirmed earlier reports that it had agreed with 97 per cent of its global customers to adopt quarterly iron ore contracts. China Daily reported on Thursday that iron ore spot prices were rising as stocks fell. The China Iron & Steel Association recently called on domestic steel mills and metals traders to boycott iron ore imports from the world's top three iron ore producers, saying the companies were hoarding ore as a negotiating strategy for controlling iron ore prices.