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BHP Billiton Says Market Should Set Iron Ore Prices

Chief financial officer says the way iron ore is priced should be more transparent, and the mining company has been pushing for a market-based pricing mechanism.

SYDNEY (AP) -- A senior executive at mining company BHP Billiton says the way iron ore is priced should be more transparent, and that such a reform could help prevent situations like one that led to four Rio Tinto employees being arrested in China on commercial spying charges.

Alex Vanselow, chief financial officer with the world's largest mining company, said BHP Billiton had been pushing for a market-based pricing mechanism for iron ore.

"Nobody asks us what the price of copper is every day or what the price of copper is expected to be 12 months from now," Vanselow told Australian Broadcasting Corp. television on Sunday. "People just pull out their screens, look at the curve and they have a good idea. It should be no different for iron ore."

Iron ore prices are set in annual, secret talks between major suppliers, such as BHP Billiton and Rio Tinto, and customers such as China's state-owned steelmakers. Prices of most other minerals, such as copper, are set by the market and fluctuate daily.

Negotiations on iron ore have proved contentious in recent years as demand soared, particularly in China, which is now seeking ways to win big price cuts.

China last week formally arrested four employees of Rio Tinto Ltd. for infringing trade secrets and bribery, in a case that has strained relations with Australia because one of the suspects, Stern Hu, is an Australian citizen.

Hu, who headed Rio Tinto's iron ore business in China, and his colleagues are accused of obtaining commercial secrets about China's steel and iron industries through improper means.

They were detained on July 5, at a time when Rio Tinto was in contentious price setting negotiations with Chinese mills.

Vanselow said he could not comment on the circumstances of Hu's case, "but I'm saying transparent prices is for everybody to benefit and creates a situation where this type of question wouldn't even be possible."

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