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Iron Ore Price
The price of iron ore products is based principally on their iron content and shipping cost. Global iron ore prices have historically fluctuated with global demand for steel and availability of vessels for charter. Quarterly iron ore benchmark prices are set in the seaborne export market and are typically based on prices negotiated by the three largest iron ore producers (Vale SA, BHP Billiton Limited and Rio Tinto plc) with global steel mills.
Other iron ore producers generally set their own customer price contracts on the basis of these global benchmark prices. Because transportation costs from the producers' port to the purchaser are generally paid for by the purchaser (referred to as freight on board), iron ore producers who ship their products over longer distances generally receive lower prices for their products than producers who ship to comparatively more proximate markets.
According to Natural Resources Canada, iron ore is now the largest commodity market after oil. Iron ore prices increased by 60% in 2010, from $105.25 per dry metric t in December 2009 to $168.53 in December 2010 (Source: International Monetary Fund). The graph below shows historical iron ore prices for the last 10 years.