The world's largest iron ore miner, the Brazilian Companhia Vale do Rio Doce, said it is negotiating price increases with its clients in Asia to put them at the same rate as European customers.
The Rio de Janeiro-based firm said reference prices for Asian clients are 11 to 11.5% less than those charged European clients depending on the type of iron ore that is purchased. In a statement, the Brazilian company said the talks are ongoing and there is no guarantee it will succeed.
However, if it is successful, Vale said the price hike would translate into an estimated revenue increase of less than 3% of the US$ 35.5 billion revenue Vale posted for a 12-month period that ended June 30.
For Pedro Galdi, an analyst from the SLW brokerage house, the Chinese and Japanese will have to say yes to the new prices: "They will be forced to accept because there is no abundance of iron ore in the market. It's take it or take it."
In related news the Brazilian Institute of Mining, Ibram, said on Wednesday, September 10, that mining investments in Brazil are expected to grow to US$ 57 billion in the next four years from the current 42 billion.
On the top of the list to receive investments from 2007 through 2011 is the iron ore sector, followed by nickel and aluminum, the institute said in its fifth revision in the past two years of its four-year forecast.
Brazil's Vale, the world's largest iron ore miner is the main producer on the local market, but large and small international miners are present in Brazil. Specialists in mining say most of the investments will be directed toward expanding capacity to attend to demand on the international market.
In 2006, total mineral output from Brazil amounted to around US$ 36 billion according to Ibram estimates.
Brazil accounts for about 19% of the world's iron ore, 14% of the world's aluminum, 40% of the world's manganese and 95% of the world's niobium, as well as several other minerals, according to Ibram.