Rio snags record iron ore price riseSHANGHAI/LONDON -- China's...

Rio snags record iron ore price rise


SHANGHAI/LONDON -- China's largest steel maker agreed to pay up to 96.5 per cent more for its 2008 iron ore in a term contract with Australian miner Rio Tinto, Baosteel said in a statement.

But the company, which negotiated on behalf of the Chinese steel industry, said the traditional annual pricing system had been maintained despite an unprecedented divergence in the price rise of Australian ore and Brazilian ore.

Baosteel agreed to a 79.88 per cent price rise for Pilbara blend fines and Yandicoogina fines, and a 96.5 per cent price rise for Pilbara blend lump for the fiscal year 2008.

"This is an extremely healthy price for Rio Tinto. It's about $US14 higher than we have expected," said John Meyer, head of resources at Fairfax I.S. in London.

"To maintain the traditional pricing system and normal market order and to hold a long-term friendly cooperation between the upstream and downstream sectors, Baosteel has settled 2008 benchmark iron ore prices with Rio Tinto after friendly negotiation," Baosteel said in the statement.

"The result represents the sincerity from the two sides to maintain the traditional pricing system and a result from joint efforts of the enterprises that carry responsibilities," Baosteel said.

"Chinese steel mills support Rio Tinto to boost investment and increase output further to meet market demand."

It added that the new reference prices per dry metric tonne Fe unit for 2008 are $US1.4466 for iron ore fines, and $US2.0169 for iron ore lump.