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Rio Tinto, the world number-two iron ore miner, is still in talks with Chinese steel mills over iron ore prices, the firm said on Monday, dousing speculation that both sides had given up on a June 30 deadline.
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Iron ore miners and their Chinese customers have until Tuesday to reach a pact on contract prices for the current fiscal year, but analysts have said the two sides appear too far part at this late hour to strike a deal in time.
"We are officially still in negotiations," a Rio Tinto spokesman told Reuters when asked if the parties had given up trying to hammer out a deal by the deadline.
Spot prices delivered in China have risen around 25 percent this month to a four-month high above $80 a ton, adding around $5 in the last week, on expectations millions more tons will hit the market unless the miners and mills reach agreement.
Spot prices are now trading at $12-$15 a ton over benchmark prices already set separately with Japanese and South Korean steel mills, which recently agreed a 33 percent price cut.
The higher spot price could be encouraging producers to take a harder line with Chinese steel mills, which are holding out for a minimum price cut of 40-45 percent.
Rio Tinto [RTP
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] and world No. 3 iron ore miner BHP Billiton [BHP
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] have argued against a benchmark price set below the spot level, saying it is unfair to producers and fails to accurately reflect market demand.
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If the miners and Chinese mills reach a deal by Tuesday, the contract price would be backdated to April 1 and run until March 31, 2010.
BHP Billiton declined to comment on the state of play.
"We could see a lot more emphasis on the spot market next week," said DJ Carmichael & Co mining analyst James Wilson. "That translates into volatility and that will be a positive for the price."
The Australians want the mills to agree to a 33 percent price cut over last year, in line with benchmarks already set with Japan's Nippon Steel and JFE and Posco of South Korea or buy ore on the spot market.
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