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Rio Tinto appears to have bowed to Chinese pressure to lower iron ore prices, announcing yesterday it would be shifting to shorter-term pricing on some contracts.
Chinese steel makers locked into quarterly contracts with the miner have been pushing for price renegotiations after the iron ore spot price dropped to below $US150.
They say they want their contract prices to reflect the sharp dip in spot prices.
According to AAP Rio Tinto chief executive Tom Albanese said “current market weakness” was driving the move to lower prices.
He said the volatile economic climate and delays in equipment supply were also putting downwards pressure on prices.
But earlier this month Albanese told investors he didn’t foresee a downturn in iron ore demand from China despite concerns about the country’s slowing steel demand.
The comments came on the back of Rio’s strong third quarter production figures.
Last week Brazil’s Vale indicated it was willing to sell ore at a ten per cent discount to reflect recent falls in prices.
Albanese said Rio’s new approach would look to use a “portfolio sales approach with a range of pricing periods linked to quoted spot indices”.
Despite the recent dip spot market prices still remain higher than last year’s average of $US135.