【澳大利亚广播电台】Rio loses 37 per cent on new iron contract

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Rio loses 37 per cent on new iron contract
http://www.abc.net.au/news/stories/2009/05/26/2581169.htm

By Online business reporter Michael Janda and staff
Posted Tue May 26, 2009 2:17pm AEST Updated Tue May 26, 2009 2:28pm AEST


Rio Tinto has an accepted a37 per cent cut in the average price it is receiving for its iron orefrom Japanese steelmaker Nippon. (ABC TV: ABC News)

The world's second biggest iron ore miner, Rio Tinto, has announced a 37 per cent price cut in one of its key contracts.

Rio Tinto said in a statement that its subsidiary, Hammersley Iron,reached an agreement with Japanese steelmaker Nippon to cut its 2009contract price from 145 to 97 US cents per dry metric ton unit for itsbenchmark types of ore (down 33 per cent), and from US$2.02 to US$1.12for a higher grade ore (down 44 per cent).

That makes the weighted average reduction in price overall for the whole contract 37 per cent, for a price of US$63 per tonne.

The agreed prices are back dated to take effect from April 1, 2009.

Last year, Rio Tinto achieved an 86 per cent rise in iron orecontract prices during the peak of the commodity boom, which camecrashing down after its peak in July last year.

Nippon Steel is the world's second largest steelmaker, and thisoutcome is likely to have a significant impact on other contractnegotiations currently underway between iron ore producers and Chinesesteel mills.

"We believe this settlement is a realistic outcome for both parties- one that reflects the global market for iron ore and the currentchallenging market conditions facing our customers," wrote Rio TintoIron Ore chief executive Sam Walsh in a statement.

Japan is Rio Tinto's second biggest iron ore market, taking 50million tonnes, versus China's 100 million tonnes; the company says itproduced a total of 175 million tonnes of iron ore last year.

Rio Tinto shares have jumped since the announcement and were trading1.3 per cent higher at $64.94 at 2:15pm (AEST), as many investors wereexpecting price cuts of more than 40 per cent for iron ore in 2009.

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