Vale Drops Iron Ore Price and Agrees to Pay Freight

Brazil's Vale, the world's largest iron ore miner, has retreated from its demand for a 12% price rise in this year's iron ore supplies and agreed to pay freight for some of its Chinese customers, two trade sources said on Monday.

Vale had withdrawn the requirement "silently", after Chinese major steel mills announced major production cuts to weather a slumping steel market in China, the sources said.

"Vale has agreed with several steel mills to carry the freight cost from Brazil to China," one of the sources said, noting that the "informal" agreement did not include a time frame.

Vale asked its Asian clients to pay about 12% to 13% more for iron ore under 2008 term contracts to bring their FOB prices in line with those paid by European steel mills, after the 71% increase it won in iron ore term negotiations earlier this year was bested by rival miners in Australia.

By Alfred Cang, editing by Lucy Hornby, Reuters.