Rio ore deal points to slump in benchmark price

Nippon yesterday secured a 33% discount on Hamersley iron ore fines, with the price set at US$97 a tonne compared with US$145 the company agreed to last year.

The price for lump products will drop 44.5%.

While the deal is unlikely to set the benchmark for iron ore contract prices in place for the bigger export volumes to Chinese steelmakers, it is seen as an initial gauge of the downward trend in prices.

The China Iron and Steel Association - representing the country's steel industry - has pushed for cuts of up to 45% at a time when many are running at a loss.

Chinese steelmakers are also looking to back out of a deal reached last year which meant they paid a premium for Australian iron ore to factor in a shorter haul compared with ore shipped from Brazil.

South Korean customers are expected to secure new price agreements soon.

The Nippon deal marks the first time in six years that iron ore prices have fallen.

BHP Billiton, Rio Tinto and Brazil's Vale account for about three quarters of global iron ore trade.

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