Kloppers Says BHP in Good Position in Iron-Ore Talks

Sept. 8 (Bloomberg) -- BHP Billiton Ltd. Chief Executive Officer Marius Kloppers said the company is in a good position to raise prices on sales of iron ore to Chinese steelmakers. There is ``still good value for the customer, and that's something that we'll take into account as we ask for prices next year,'' Kloppers said today in a Bloomberg Television interview in New York. BHP won a price increase of as much as 97 percent in July from Baosteel Group Corp., China's largest steelmaker, matching a similar agreement reached by Rio Tinto Group. BHP and Rio Tinto, which ship their ore from Australia, both argued for bigger increases than competitor Cia. Vale do Rio Doce, which exports from Brazil. Kloppers said the present iron-ore pricing process needs to be improved. ``The current system that causes people to be in a frictional relationship for half the year and then try and mend that relationship for the second half of the year is generally not a desirable thing,'' he said in a separate interview. Off-Exchange Trading BHP, the world's largest mining company, is participating in off-exchange trading for iron ore offered by Credit Suisse Group and Deutsche Bank AG. The banks' trading platforms handle swaps with initial maturities as far out as December 2009 that are settled in cash each month against an iron-ore index published by Metal Bulletin. Negotiations with Chinese iron-ore buyers traditionally start in November and are meant to conclude by April 1. This year, Melbourne-based BHP and Rio Tinto revived demands that they receive a so-called freight premium to reflect the cheaper transportation costs that Asian companies pay to import ore from Australia rather than Brazil. BHP, Rio Tinto and Rio De Janeiro-based Vale control about 80 percent of the world's seaborne trade in iron ore. Under the benchmark system, the first producer to reach a price agreement with customers generally sets the market price. BHP rose 60 cents, or 1.6 percent, to A$37.60 today in Sydney on the Australian stock exchange. The shares have fallen 6.3 percent this year.