Miners optimistic about Chinese iron ore price talks

Mining giants BHP Billiton and Rio Tinto will update the markets on their financial performance this week against the backdrop of difficult talks with China over iron ore pricing.

Analysts are cautiously optimistic that the setting of iron prices will come at an opportune time for the two as a result of high global demand. BHP and Rio recently announced plans to merge iron ore operations in Australia which is also expected to increase profit margins.

However, analysts remain concerned about the response of the European regulator to the deal after the west Australian authorities imposed an extra annual levy of A$300m (£166.6m) on the pair.

Rio's recent appointment of a Mandarin speaker to the company's top job in China is expected to ease negotiations with the Chinese authorities.

This year's negotiations are taking place in neutral Singapore after last year's disastrous discussions which resulted in the arrest of four Rio negotiators on corporate espionage charges.

BHP is expected by analysts to announce weak unadjusted earnings of US$7.9bn for the last six months of 2009, down from $13.9bn for the half year to the end of 2008. By contrast, analysts expect Rio to post unadjusted earnings of $7.3bn for the six months to the end of 2009, compared to $6.1bn for the first half of the year.