Vale sees iron ore quality bonus above Australian ore price

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

31 Oct 2010

Brazil's Vale earns a premium for the high-quality of its iron ore that beats by 44% the freight cost advantage Australian producers have on exports to China, the company said Thursday. Chinese steelmakers are willing to pay about $6/mt for each extra percentage point of iron content in ore allowing Vale to earn an average of $21.60/mt more than the average cost of Australian ore before freight costs to China are added.
 That is 44% greater than the $15/mt freight-cost advantage that Australian iron-ore cargoes have over Brazilian loadings because of Australia's closer proximity to China, the world's largest ore market and largest steelmaking nation. "This is proof that our new spot-market based pricing is having a positive effect," CEO Roger Agnelli told reporters on a conference call from Sao Paulo. "We have managed to find a way to price in our higher quality ore where we didn't before under long-term contracts."
Vale's iron-ore exports have an average iron content of 66%. Chinese steelmakers are willing to pay more for ore with higher levels of iron because it requires less coal to smelt the iron from the ore and because it produces lower levels of carbon dioxide and other pollutants, Agnelli said.

Source: Platts