Rio Tinto agrees 33% iron-ore price cut with Nippon Steel - Market Watch
HONG KONG (MarketWatch) -- Rio Tinto Ltd. has agreed to a 33% cut in iron-ore prices with Nippon Steel Corp., establishing a possible benchmark for pricing the commodity this year amid a tumble in prices for finished steel.
Rio Tinto(RTP) $176.79 +2.95 (1.70%) said in a statement Tuesday that it had reached a pricing agreement with Nippon Steel for fiscal year which began in April, setting its fine iron ore at 97 U.S. cents per dry metric ton, compared to $1.45 a ton last year.
A higher-grade ore, known as the Pilbara Blend Lump, will fall 44% in price to $1.12 a metric ton, Rio said.
Attempts to strike a similar deal with Chinese steel giants, such as Baoshan Iron & Steel, may meet resistance, however. Various news reports Tuesday said the Chinese mills want a total reversal of last year's almost doubling of ore prices by Rio and fellow Australian miner BHP Billiton Ltd.(BHP).
However, Rio Chief Executive Sam Walsh promoted the Nippon deal Tuesday, saying: "We believe this is a realistic outcome for both parties, one that reflects the global market for iron ore and the current challenging market conditions facing our customers."
Sydney-listed shares of Rio were up 1.4% in late Tuesday trade. In Tokyo, Nippon Steel shares fell 0.6%.
Granted, this is only one customer, but last I looked, you lower margin, you lose profit. Stock rose. Must have been "not as bad as expected."
Tuesday, May 26, 2009
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