The Brazilian iron ore producer Vale has issued an addendum to its iron ore sales contracts for Chinese buyers hiking the price by 20% from September 1st reported SBB. Vale has been angered by the Australian producers Rio Tinto and BHP breaking the previous accord and managing to achieve significantly higher FOB prices than Vale on the basis that freight costs are lower from Australia to China than from Brazil to China. With Brazilian exports to China projected to be 100 million tons this year at a sales price of $77.34/ton, one can understand Vale’s desire to close the gap on the potential $1.54b difference. As SBB point out though, the timing is interesting since the spot iron ore price has been weakening and hence is not as supportive as it would have been a month or two back. The price increase may have more to do with positioning ahead of the 2009 negotiations which start in November.