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“We didn’t settle on a June quarter lump premium for the contracted volumes with BHP Billiton, due to the large gap between the price ideals of each party,” a steel mill source in Beijing told Steel First.
BHP Billiton was eyeing a lump premium settlement of over $0.22 per dmtu for the June quarter, while mills were looking at no more than $0.20 per dmtu, the source said.
“Steel mills can choose to move to monthly pricing for BHP Billiton lump premium by referring to the average spot Platts lump premiums for the underlying month, if they can’t reach a quarterly agreement during the 20 days before the underlying quarter,” he said.
Another steel mill source in Shandong province also confirmed that it would move to monthly pricing for BHP Billiton lump premiums.
The lump premium stood at $0.29 per dmtu between Chinese steel mills and BHP Billiton for the March quarter.
Rio Tinto, BHP Billiton’s Australian counterpart, is sticking to the quarterly pricing scheme, and Chinese steel mills had concluded talks with Rio Tinto, following Baosteel’s settlement at $0.229 per dmtu several weeks ago.
“With Rio Tinto, we didn’t have much choice but to follow the prices set by Baosteel,” the steel mill source in Beijing said.
Certain steel mills in China have agreed to take contracted lump from BHP Billiton using a monthly pricing scheme, after failing to agree on a quarterly premium, sources told Steel First.