Iron ore prices are set to get more competitive in the following months as BHP Billiton, along with other iron ore miners and steel producers, mull the creation of a new iron ore global pricing system by year's end or early 2012.

Speaking before the World Steel Association conference in Paris Thursday, Marcus Randolph, chief executive officer of BHP Billiton's ferrous and coal division, said the Anglo-Australian global miner is currently developing a pricing scheme that allows iron ore prices to be quoted on a screen. This system will give market participants a more transparent and updated price over other index providers.

The new, more transparent iron ore global pricing system will be simply called Global Core.

The framework for Global Core is based from Global Coal, another trading platform BHP Billiton created that assists coal consumers and producers to post their prices on a Web site to facilitate a more direct buying and selling of thermal coal.

"As you try to create a financial market, a derivative market, you actually must have 100 per cent verification of what is the price right now...[Global Ore is] not based on a reported price, it's visible to people on a screen real-time," Randolph was quoted on the Fox News.

The derivatives market has grown since BHP Billiton, Anglo-Australian Rio Tinto, and Vale SA of Brazil, the world's three largest iron ore miners, replaced the traditional price benchmarking system in 2009 from annual to shorter term price contracts.

The contracts were initially set up on a quarterly system, but many, consumers and producers alike, found that quarterly price adjustments inconvenient, resulting to more contracts priced and sold on a monthly basis, Randolph said.

"The intent of a monthly price is not to negotiate. It's actually fixing the price where the market is," Randolph said.

Both iron ore consumers and producers will own the Global Ore trading system, where in addition, financial institutions may also participate.

BHP Billiton sells more than 50 per cent of its iron ore on a monthly basis. Only 15 per cent of the world's total iron ore sales are sold higher than quarter price contracts, the BHP Biliton executive said.

Initially, the Global Ore platform will allow trading of iron ore fines between consumers and producers.

Randolph said the Chinese have expressed willingness to participate in short-term price negotiations compared to the Japanese, who prefer annual contracts because of low steel demand.

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