Fortescue discounts ore, seeks $7.3bn backing

The China Iron and Steel Association (CISA), led by steel producer Baosteel Group, yesterday secured a 35% cut in the price of Fortescue's iron ore for the second half of 2009.

Steelmakers will pay US$55.50 a tonne for Fortescue's fines product and US$61 for lump varieties.

The deal shaves a further 3% off the rates secured by the Pilbara producer's major rivals, Rio Tinto and BHP Billiton, in their contracts with Japanese and South Korean mills since the start of the contract year in April.

However, Rio said the agreement would not establish a benchmark for contracts signed by other producers.

“Rio Tinto conducts its own negotiations with its customers worldwide," the company said.

"How other producers reach their own agreements is up to them."

However, CISA said that Chinese mills will now seek similar price cuts with the other two Australian miners and Brazil's Vale to ensure consistency.

Steelmakers had previously sought a 40% price cut.

Fortescue's agreement requires its Chinese customers to import at least 20m tonnes of the Pilbara miner's ore between July 1 and December 31.

The deal is linked to US$6bn ($7.3bn) of lending Fortescue hopes to finalise with Chinese banks by the end of September.