02 Juli 2008
Rio wins 97 percent ore price increase from Asia steel mills

Rio Tinto Group, the worlds second- largest iron ore exporter, won price increases of as much as 97 percent from Asian steelmakers, fueling inflation concern and adding pressure on BHP Billiton Ltd. to settle contracts.

The agreements for the 12 months that began April 1 match prices agreed on June 23 with Baosteel Group Corp., Chinas biggest mill, the London-based company said Tuesday in a statement.

Iron ore prices have gained almost fourfold since 2001 to a record, raising costs for mills such as South Koreas Posco and stoking inflation in Asia. BHP Billiton Ltd., the third-largest exporter of the ore, hasnt concludedprice talks.

"BHP are holding out for an even higher price," said Peter Rudd, a Melbourne-based analyst at Carrol, Pike Piercy Pty. "Id be looking for something a bit better for BHP."

Rio rose A$2.00, or 1.5 percent, to A$137.50 at the 410 p.m. Sydney time close on the Australian stock exchange. Rios London-traded shares fell 0.7 percent to 59.69 at 817 a.m. local time. BHP rose 1.6 percent to close at A$44.40 in Sydney, before falling 1.3 percent to 18.95 at the same time in London.

BHP hasnt yet settled iron ore prices, spokeswoman Samantha Evans said Tuesday by phone from Melbourne. Posco, Asias third-biggest steelmaker, agreed to pay Rio as much as 97 percent more for iron ore this year, spokeswoman Ko Min Jin said Tuesday.

Crude-steel demand in Japan, Asias largest economy, will probably rise to an almost 35-year high this quarter, the government said yesterday. Nippon Steel last month raised contract prices of steel plate for domestic shipbuilders and machinery makers by about 40 percent to a record.

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

Rio is increasing production from its Pilbara operations in Western Australia to 320 million metric tons a year by 2012 and has a target beyond that of 420 million tons a year, the company said. It produced 145 million tons last year from the mines.

BHP, the worlds largest mining company, said June 24 that the prices agreed by Rio are too small to cover extra shipping costs. Chinese mills, the worlds largest consumers of the ore, will resist any attempt by BHP to win a larger price than agreed to with Rio, an official familiar with the talks said June 25.

The price rise won by Rio is higher than the 65 percent to 71 percent increase agreed to in February by Cia. Vale do Rio Doce, the worlds biggest iron-ore producer.

Central banks in Asia are battling to control price pressures, with Indonesia, India, Taiwan and the Philippines all raising interest rates in the past month. Energy and raw-material prices have risen too fast and inflation pressures were continuing to build, Chinas central bank said last month.

(Sumber: The Jakarta Post)

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