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Rio Tinto targets lucrative spot market sales

Rio Tinto targets lucrative spot market sales

Sydney: Iron ore miner Rio Tinto has revealed that it may sell more ore in spot markets, despite a big rise in the price some steel mills are preparing to pay, reports Reuters. "Despite repeated urging on our part, Rio Tinto iron ore from the Pilbara continues to be sold without the premium we believe it merits for being so much cheaper to import than iron ore from elsewhere, a fair return for the saving on freight, the natural premium of geographic proximity," said Sam Walsh, ceo of the company's iron ore arm.

"Until some recognition of the natural premium of geographic proximity is possible, and while the spot market continues to reward those without long-term benchmark supply contracts with customers, then we will do what we can to secure an appropriate return for our shareholders," Walsh said.

Rio has been pushing its customers to pay a premium for Australian ore from the Pilbara region to compensate for a price differential on shipping costs versus material from Brazil's Vale. The company, which is currently battling a hostile take over bid from rival BHP Billiton, is still in negotiations with its client to determine the price increases.

Rio Tinto has announced that it is expanding production at its Australian Pilbara iron ore operations to 220m tonnes by 2009. It has also approved a $475m project to boost iron ore concentrate production at its Iron Ore Company of Canada (IOC) unit to help meet strong global demand.  [13/03/08]