On July 29, Australia's second largest miner BHP Billiton announced the terms it has agreed with a range of iron ore customers for the 2009 contract year.
According to a statement released by the company, BHP Billiton has settled 23 percent of total iron ore volumes at an agreed annual contract price. The price for iron ore fines will be approximately 33 percent lower than the contract prices agreed in the 2008 contract year, while the price for iron ore lump will be approximately 44 percent lower than the contract prices agreed in the 2008 contract year.
Meanwhile, a further 30 percent of BHP Billiton's total iron ore volumes will be sold on a mix of quarterly-negotiated, spot market and index-based pricing.
"Negotiations for the remaining 47 percent of iron ore volumes are ongoing," said BHP Billiton.
The miner said that it believed that current settlements are indicative of continued progress towards transparent market pricing.
"These terms vary and reflect the specific needs and requirements of each customer, consistent with our marketing approach," BHP Billiton added.
BHP Billiton's contract prices are the same as those achieved by Australia's largest miner Rio Tinto when it settled prices with its major Japanese, Taiwanese and South Korean customers.
BHP Billiton has long sought changes to the current benchmark contract system, in favor of a system based on spot prices or other indicators. The company's statement appears to indicate that iron ore sales are now evolving from the benchmark contract system since there is a significant proportion of the material now which is being sold in a different form, with which presumably BHP Billiton is reasonably comfortable, while almost all iron ore has up to now been sold within contract, with only a very small proportion sold at spot prices.