BHP Says Trend to Market-Based Ore Pricing Will Stay (Update1)

NEWYORK, Mar. 23 -- BHP Billiton Ltd., the world's largest mining company, said the trend toward market-based pricing of iron ore will continue, as it pushes to change the way the commodity is priced.

"Transparent and regular pricing allows customers to mitigate risks on short, medium and long term contracts," the Melbourne-based company said in slides for a presentation today in Perth by Ian Ashby, president of the company's iron ore operations.

Iron ore and coking coal suppliers traditionally hold annual negotiations with steelmakers to fix benchmark prices that take effect from April 1, the start of the Japanese fiscal year. Negotiations took at least six months in 2008, and last year they failed to produce a recognized benchmark price. BHP also produces copper, oil, aluminum and silver, which are sold at market prices.

BHP will continue to enter long-term contracts with some iron ore customers, while seeking flexibility that reflects price movements, Ashby said. BHP advanced 1.3 percent to A$43.16 at 1:34 p.m. in Sydney trading on the Australian stock exchange.

BHP, the third-biggest shipper of iron ore after Vale and Rio, boosted sales from Western Australia on a mix of cash, quarterly and index pricing to 46 percent in the fiscal first half, from 30 percent in the previous half.

Iron ore was BHP's third most profitable unit in the six months through Dec. 31 with $2.09 billion in earnings before interest, tax, depreciation and amortization, or 24 percent of the company's total Ebitda.