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Vale predicts less volatility in ’13 iron ore prices

Keywords: Tags  Vale, iron ore, iron ore prices, Jose Carlos Martins, Murilo Ferreira, index pricing, Michelle Madsen

LONDON — Brazilian iron ore miner Vale SA expects iron ore price volatility to ease in 2013.

"Prices will not change so much. We expect only minor movements," Vale chief executive officer Murilo Ferreira said Thursday in London.

The past year has seen iron ore prices swing from highs of nearly $150 per tonne in April to lows below $90 per tonne in early September.

The miner, which was the last of the big three global iron ore producers to shift to short-term pricing from the historical annual benchmark system, is now pricing half its sales on daily index prices.

AMM sister publication Metal Bulletin’s 62-percent iron content ore index stood at $121.64 per tonne c.f.r. China Friday.

Vale used a range of pricing methods to sell its product to different customers, iron ore head José Carlos Martins said. It sells 25 percent on the spot market, and the rest through quarterly or quarterly lagged contracts.

"We don’t have a preference for which pricing to use, but we try to avoid different prices, as it creates volatility," Martins said. "There is a tendency for (contract) prices to evolve to the daily price."

Differences in pricing do occur between countries, however, as the Chinese market is more liquid, while Vale’s pricing in Japan and South Korea is still based on one- to three-month pricing, Martins said.

The price outlook remains uncertain, however.

"Consumers of iron ore are tempted to reduce prices and they will remain volatile," Martins said, but added that "iron ore prices will stabilize in the long term."

Vale has no plans to participate in the over-the-counter iron ore derivatives market to address volatility, it has said.

Nina Nasman, London, contributed to this story.

A version of this article was first published by AMM sister publication Steel First.

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