Rio Tinto plays hardball on iron ore prices

The world’s second biggest iron ore miner has flagged changes to the way the commodity is priced saying it is prepared to sell into the lucrative spot market and hold off on finalising contracts until major Chinese customers cave in to its demands.

The head of Rio Tinto’s iron ore division, Sam Walsh, says the company is standing firm on its call for the Chinese to pay a freight premium for Australian iron ore.

Rio Tinto argues Chinese steel mills get WA’s iron ore at a discount because shipping costs from Australia are cheaper than from the world’s other major producer in Brazil.

Mr Walsh says Rio Tinto wants an iron ore price rise of more than 70 per cent, despite Brazil settling for a 65 percent rise for some of its iron ore earlier this year.

He says Rio Tinto is prepared to be patient because it is prepared to sell more of its iron ore into the spot market which is trading at more than $200 a tonne.
Fall by the wayside

Rio Tinto believes the vast majority of Western Australia’s iron ore explorers will fall by the wayside as the supply of the commodity outstrips demand.

Mr Walsh says there are 90 miners and explorers involved in WA’s booming iron ore sector and the skyrocketing costs of getting a project off the ground means most of those projects will miss the boom.

Mr Walsh says only a handful of iron ore miners are likely to get off the ground.

“I think it will be numbers you can count on one hand, obviously some of the projects will go ahead some of them are well down the track and they will be shipping,” he said.