Iron ore miners have given steel
mills in top importer China the option to buy the raw material
cheaper for fourth-quarter contracts, sources at mills said on Friday,
following a fall in spot rates to 11-month lows.
Quarterly contracts are usually
based on the average of index-linked spot prices over a three-month period
ending a month before the start of each quarter.
But Chinese mills, with margins
cut by lower steel prices, are not keen on paying more than $175 a tonne for
iron ore i.e. the fourth-quarter contract rate based on June-August average
spot prices when the current rate is around $160.
Three sources at Chinese mills
briefed on the change told Reuters that iron ore miners, such as top producer
Vale SA , have offered Chinese mills the option to pay for fourth-quarter
supplies based on more current rates.
“We received a letter from
Vale asking us for our opinion of changing fourth-quarter pricing to be based
on October-December spot rates,” said a source with one of China's
mid-sized steel mills.
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