BHP Billiton (LSE: BLT) released as update on iron ore price negotiations, announcing it has come to terms with customers to sell 23% of iron ore volumes with significant discounts to the 2008 prices.
The discount for iron ore fines compared to the previous year will be 33%, while the discount for iron ore lump will amount to 44 percent. Another 30% of BHP’s iron ore volumes will be sold on a mix of quarterly negotiated pricing, spot market and index-based prices.
Chinese mills will be the main consumers of BHP’s iron ore. BHP is currently trying to settle contracts for 47% of iron ore volumes, still holding negotiations with customers that are trying to buy ore on better terms than those already agreed upon for 23% of the volumes.
The prices are similar to those agreed on by Rio Tinto with its Japanese, Taiwanese and South Korean customers this year.
The company noted the change in the pricing system in its statement.
“The Company believes that current settlements are indicative of continued progress towards transparent market pricing,” said BHP.
BHP’s stock went through a turbulent period last week after stating China’s build up of commodities inventory was almost complete, setting a mixed demand outlook for the year and simultaneously reporting a 10% decline in Q4 iron ore output.
BHP was down 2% on the news on LSE this morning.
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