Dec. 11 (Bloomberg) -- Rio Tinto Group, the second-largest iron ore exporter, appointed a new chief negotiator with Asian steel mills after the failure this year of price talks with China, boosting prospects for the latest talks.
Danny Goeman will become marketing general manager of Rio's Asian iron ore unit, Nick Cobban, spokesman for the London-based company, said yesterday. China detained four Rio executives including Stern Hu, the head of its ore unit in China, in July for allegedly stealing commercial secrets and bribery.
The four-decade old annual benchmark iron ore pricing system was fractured this year after Chinese mills, the biggest consumers, failed to reach agreement with the three largest suppliers. With a new team at Rio and with Baosteel Group, China's biggest mill, returning as lead Chinese negotiator, there's now greater chance of a deal, Glyn Lawcock, head of resource research at UBS AG in Sydney, said today.
"It's time to shuffle out the old team and bring in a new team," said Lawcock, the top-rated analyst on Rio's Australian stock this past year, according to data compiled by Bloomberg. "There is a willingness on the Chinese steel side, in our view based on our visit up there last month, to settle a price this year."
Rio gained 0.4 percent to A$70.09 at 11:10 a.m. Sydney time on the Australian stock exchange. BHP Billiton Ltd., the world's biggest mining company and the third-largest iron ore supplier, rose 0.7 percent to A$40.24. Rio de Janeiro-based Vale SA is the No. 1 iron ore exporter.
China this year demanded a bigger price cut for iron ore than the 33 percent offered to Japanese and Korean mills by Rio and BHP. The China Iron & Steel Association, which led the last round of talks, said in October it will seek to set prices separately from the rest of the world as imports and cash prices surged. Lawcock said Baosteel told UBS it would be taking over the lead in the talks in consultation with the association.
Rio needs to hear from Baosteel and CISA "as to exactly what is their view in relation to prices," Sam Walsh, chief executive officer of Rio’s iron ore unit, said Nov. 2. China may use a new pricing mechanism for contracts in 2010, he said.
Goeman will report to Will Malaney, who previously led the iron ore talks for Rio.
UBS, Goldman Sachs JBWere Pty and RBC Capital Markets have forecast a 20 percent gain in contract prices this year amid a rebound in demand from Asian buyers.