China agrees to nearly double ore price

SHANGHAI (AFP) ¡ª Baosteel, China's largest steelmaker, said Tuesday it had agreed to nearly double what it pays Anglo-Australian mining group Rio Tinto for iron ore.

Baosteel, acting on behalf of China's steel industry, negotiated to pay between 80 and 97 percent more than last year depending on the category of iron ore, which is used to make steel.

The new prices will affect all iron ore deliveries for the 2008 contract year that began on April 1, Rio Tinto said in a statement.

Baosteel called the deal mutually beneficial and said it would help the long-term development of the steel industry on both the mining and milling sides.

"Chinese steel companies will support Rio Tinto as it expands its investment and will increase output to meet market demand," Baosteel said in a statement.

The deal was "very significant" as iron ore is one of the three main drivers of Rio Tinto's earnings, along with copper and aluminium, a Rio Tinto spokesman said.

"The increase is higher than the 71 percent and 65 percent settlements announced by Brazilian mining giant Vale earlier in the year, reflecting both the strength of the market and an indication of the proximity of Rio Tinto's iron ore to its customers," he said.

Baosteel traditionally sets the price for the nation's other steel producers for internationally purchased iron ore.

Prices of iron ore have soared in recent years due to growing demand led by a construction boom in fast-growing China and India.

The latest increase also reflects rising transportation costs that have increased due to record oil prices.

China imported 383.09 million tonnes of iron ore in 2007, up 17.4 percent from the previous year, according to government figures.

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