Trying to break deadlocked talks with the Big Three iron ore suppliers, mainland steelmakers have won a 35 per cent price cut from Fortescue Metals Group - 2 percentage points better than the benchmark set by iron ore giant Rio Tinto.
The deal, in which mainland steelmakers would provide up to US$6 billion in funding for the Australian miner's expansion, is widely viewed as a face-saving deal for the China Iron and Steel Association (Cisa), the country's lead negotiator.
However, the price is only marginally lower than what Rio demanded. It is uncertain whether Rio, BHP Billiton and Vale will compromise and accept the same price.
Cisa said yesterday that Fortescue, Australia's third-largest iron ore exporter, had agreed to supply 20 million tonnes of iron ore between last month and December to mainland mills at 94 US cents per dry tonne for ore fines. This is a 35 per cent cut from the previous year.
Yao Jian, a spokesman for the commerce ministry, welcomed the 'new model' of negotiating prices outside talks with the Big Three.
Fortescue, which started production last year with an annual capacity of 50 million tonnes, has not previously participated in the 40-year-old ritual of price negotiations.
