Brazil\'s Vale negotiating change in contract system

Brazilian mining conglomerate Vale, the world\'s leading iron ore producer, says it is negotiating with its main clients, Luxembourg-based Arcelor Mittal and Taiwan\'s China Steel, to give them a more favorable pricing system. \"We came under pressure from our clients for a change in the pricing system,\" Jose Carlos Martins, Vale\'s executive officer for ferrous mineral, said during a company event in London that was webcast on Vale\'s website Thursday. The new system will make it possible to readjust iron ore contracts based on prices closer to those on the spot market where prices are currently more favorable to the clients. \"Today, prices are down 20 percent but we don\'t know if this will last until the end of the quarter,\" Martins said. He said the switch to this new system was \"inevitable\" as clients are seeking more liquidity. Most Vale sales already take into account the quarterly average of iron ore prices and no longer the average price recorded in the three previous months as before. Today, prices on the spot market favor the client but if they go up, the client will no longer be able to revert to the previous system. Vale is banking on iron ore remaining at between $140 and $150 a ton over the next two to three months, according to Martins. Next year, the Brazilian mining giant hopes to sell 300 million tons of iron ore. Late last month, it announced investments of $21.5 billion for 2012, including 60.5 percent for project execution. It also said the investment figure for 2011 should be around $19 billion, instead of the $24 billion it had projected earlier.