The biggest steelmaker in Taiwan, China Steel Corporation, said on Tuesday that Brazil's Vale ( VALE , quote ) -- the world's largest producer of iron ore -- agreed to slash its price by 20% to 25%.
Vale's choices were limited here as China Steel is reducing capacity utilization amid weakening global demand for its steel.
The Taiwanese company said last month that it was actively seeking to defer or cut upcoming shipments of iron ore and coking coal from major suppliers such as Vale which supplies about 30% of its iron ore needs.
To accommodate China Steel, VALE agreed to price fourth quarter shipments according to the Platts iron ore index in the October to December period, effectively freeing its customer from its contract and giving it the chance to take advantage of today's cheaper spot prices.
China Steel is still in talks with Rio Tinto ( RIO , quote ) and BHP Billiton ( BHP , quote ) over rolling their quarterly supply contracts forward as well. These two companies combined supply the other 70% of China Steel's iron ore demand.
Iron ore is currently trading at about $143 per ton, down substantially from its record high earlier this year of nearly $200 a ton.
Over the summer, when China Steel's most recent contracts were set, prices trended at $170 to $180 per ton.
Separately, 384,000 tons of ore remain stranded in Brazilian port after the Vale Beijing -- one of the biggest ships in history -- was damaged during the loading process.
VALE does not own the ship, but while it is being repaired, that supply and any future shipments that would have gone to China will be off the table.
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