bhp rio may win 85 percent increase

FMG too, good article below


BHP, Rio May Win 85% Increase in Iron-Ore Price, Citigroup Says

By Brett Foley and Alistair Holloway

April 7 (Bloomberg) -- BHP Billiton Ltd. and Rio Tinto Group, the world's biggest and third-biggest mining companies, may win an 85 percent increase in iron-ore contract prices this year and higher prices for coal, Citigroup Inc. said.

The jump, from a previous estimate of 65 percent, includes a so-called ``freight premium'' to reflect the lower cost for customers in China and Japan of shipping ore from ports in Australia rather than mines in Brazil, Citigroup's Sydney-based analysts Alan Heap and Alex Tonks said in a report dated today.

``It is now more likely that Australian producers will achieve a larger price increase in the current round of annual price negotiations'' than the 65 to 71 percent that Cia. Vale do Rio Doce settled for some of its ore, Citigroup said. The bank forecasts a further increase of 30 percent next year.

Rio and BHP, the second and third-largest exporters of the raw material, are still in talks with Asian steelmakers to set 2008 prices. Rio has said it wants more than the 71 percent price gain Brazil's Vale secured for its fine ore from the Carajas mine in February. Vale is the biggest iron-ore exporter.

Contract prices for the steelmaking ingredient have risen to a record for a sixth straight year as China boosts output of the metal to feed a construction boom. China is the largest buyer of iron ore. Soaring freight fees last year added to the price increases for Asian steelmakers and made iron ore from Australia more cost effective than Brazilian supplies. Annual contracts start from April 1.