Chinese-Australian Pact Brings Big Rise in Iron Ore Prices
China’s largest steel maker, Baosteel, and the Australian mining company Rio Tinto have agreed on the highest price increase in at least a decade in iron ore term contracts, the companies announced on Monday.
Baosteel has agreed to pay up to 96.5 percent more for its iron ore under a term contract with Rio Tinto, higher than the 67 to 71 percent that Chinese mills and the Brazilian mining company Companhia Vale do Rio Doce agreed to earlier this year.
But the company, which negotiated on behalf of the Chinese steel industry, said the annual pricing system had been maintained despite an unprecedented divergence in the price rise of Australian ore and Brazilian ore.
“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 an e-mailed statement.
Baosteel agreed to a 79.88 percent price rise for Pilbara blend fines and Yandicoogina fines, and a 96.5 percent price rise for Pilbara blend lump for the 2008 fiscal year. Fines and lump differ in the size of the ore particles.
“This is an extremely healthy price for Rio Tinto. It’s about $14 higher than we had expected,” said John Meyer, head of resources at Fairfax I. S. in London.
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