March 24 (Bloomberg) -- Rio Tinto Group, the world's second-largest iron ore exporter, may settle prices of the steelmaking ingredient on a quarterly basis, as rivals move to end a four-decade-old tradition of negotiating annually.
Talks are proceeding with Rio's customers, Sam Walsh, head of London-based Rio's iron ore business, said in an interview in Singapore today. BHP Billiton Ltd. and Vale SA are unlikely to have reached a settlement yet, he said.
Brazil's Vale, the world's biggest iron ore supplier, is seeking shorter sales contracts that may boost prices 90 percent for the April quarter, Credit Suisse Group AG said yesterday. Producers in Australia will make $20 billion more a year by selling products at cash levels rather than on annual contracts, Goldman Sachs JBWere Pty said March 1.
"Our contracts require us to establish a price each year," said Walsh who's attending the Asia Mining Congress. "Whether that price is established on an annual basis or whether it's established on a quarterly basis, that is up to the negotiation."
Shares of Rio rose 2 percent to close at A$77.20 on the Australian stock exchange.
Iron ore producers are seeking to change the way prices are negotiated as Chinese demand crimped supplies. The Asian nation may import 610 million tons of the steelmaking ingredient this year, near last year's record 628 million tons, Shougang Corp. said today at the same conference.
No Price Pact
Chinese steelmakers last year failed to reach an agreement with Rio, deeming a 33 percent price cut offered as insufficient.
BHP Billiton, the world's third-largest supplier of iron ore, raised the amount of products it sold on shorter-term pricing last year.
"The customers are well and truly aware of the pressure on annual prices," Walsh said. "They are aware of the issues that came to pass last year that moved to a situation where really an annual benchmark price, the system is broken."
Prices are traditionally set for the 12 months starting April 1. Rio last year agreed to sell benchmark products to Japanese steelmakers at a 33 percent discount, or $61 a metric ton, excluding freight. The cost of 62 percent iron-content ore delivered to the port of Tianjin, China, was $144.70 a ton yesterday, according to The Steel Index.