Rio hikes iron ore contract prices for Asian steel mills by 97 per cent

02 July 2008

Mumbai: The Rio Tinto Group, the world's second-largest iron ore exporter, has finalised iron ore contracts with Asian steelmakers at a 97 per cent premium, putting pressure on rival BHP Billiton Ltd to hike prices and fueling inflation fears.
 
The agreements for the financial year that began on 1 April match prices agreed on 23 June with Baosteel Group Corporation, China's biggest mill, the London-based company said in a statement.

The price hike that Rio won is higher than the 65-71 per cent increase agreed to in February by Cia Vale do Rio Doce, the world's biggest iron-ore producer. Rio will get an additional $7.45 a tonne on top of the $65 a tonne that Vale will be receiving for its fines in China.

"These agreements are a strong endorsement of the settlement reached last week and reflect the very strong demand for our products across the world's fastest-growing markets," Sam Walsh, Rio's iron ore chief executive, said in the statement.

The price rise means the annual value of Australia's iron ore exports will surge to more than $35 billion, up from $20 billion in the previous year.

Posco, Asia's third-biggest steelmaker, also agreed to pay Rio as much as 97 per cent more for iron ore this year, company sources said.

Iron ore prices have recorded a four-fold increase since 2001, raising costs for mills like South Korea's Posco that have no supply sources, stoking inflation in the process.