New iron ore pricing likely spot, contract and quarterly: Cliffs

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Jul 2010

Cliffs Natural Resources' Joseph Carrabba took time in the company's earnings call to discuss the changing dynamics of iron ore pricing as the global industry grapples with a move away from the decades-old mechanism of annual benchmark pricing. He said that Cliffs is negotiating with customers on both pricing and pricing mechanisms in 2010.
"It's not going to be black and white," said Carrabba of the move toward a new pricing system. "There will be some spot [pricing], some annual contract, some quarterly," he said, emphasizing that there would not likely be one broad, blanket, all-encompassing pricing mechanism for all iron ore worldwide.
Indeed, the company noted that the move toward quarterly pricing is "more prevalent out of Australia," and less so in North America, possibly suggesting that Cliffs North American customers could still be free to negotiate annual contracts if they so desire.
In terms of quarterly and spot pricing, especially for its Asia pacific iron ore operations, a Cliffs executive said that the Platts IODEX iron ore price is the index "most commonly referenced."
The company further disclosed that, in addition to its previously reported arbitration with Essar Steel Algoma concerning iron ore pricing, Cliffs is also in pricing arbitration with its largest customer, ArcelorMittal.
Cliffs late Wednesday reported second quarter income of $260.7 million on revenues of $1.18 billion, up from Q2 2009 income of $45.5 million on revenue of $390.3 million, driven by increased product volumes and profit margins. For the six months, the company had income of $354.2 million on revenues of $1.912 billion, up from income of $38.1 million on revenues of $855.1 million.
Cleveland-based Cliffs is North America's leading producer of iron ore pellets.

Source: Platts