Wednesday July 2, 2008
Rio Tinto wins 97% rise for iron ore Move fuels inflation concerns
MELBOURNE/SEOUL: Rio Tinto Group, the world's second-largest iron ore exporter, won price increases of as much as 97% from Asian steel-makers, fuelling inflation concerns 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, China's biggest mill, the London-based company said yesterday in a statement.
Iron ore prices have gained almost fourfold since 2001 to a record, raising costs for mills such as South Korea's Posco and stoking inflation in Asia. BHP Billiton Ltd, the third-largest exporter of the ore, hasn't concluded price talks.
“BHP are holding out for an even higher price,'' said Peter Rudd, a Melbourne-based analyst at Carrol, Pike & Piercy Pty. “I'd be looking for something a bit better for BHP.''
A worker watches as steel reinforcing rods are removed from a building demolition site for recycling in Beijing on June 24, 2008. Anglo-Australian mining group Rio Tinto said that it had agreed a near doubling of the price of its iron ore sales to Chinese steel maker Baosteel. - AFP BHP hasn't yet settled iron ore prices, spokesman Samantha Evans said yesterday by phone from Melbourne. Posco, Asia's third-biggest steelmaker, agreed to pay Rio as much as 97% more for iron ore this year, spokesman Ko Min Jin said yesterday.
Crude-steel demand in Japan, Asia's largest economy, will probably rise to an almost 35-year high this quarter, the government said on Monday. Nippon Steel last month raised contract prices of steel plate for domestic shipbuilders and machinery makers by about 40% 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 world's fastest-growing markets,'' Sam Walsh, Rio's iron ore chief executive, said in the statement.
Rio is increasing production from its Pilbara operations in Western Australia to 320 million tonnes a year by 2012 and has a target beyond that of 420 million tonnes a year, the company said. It produced 145 million tonnes last year from the mines.
BHP, the world's largest mining company, said June 24 that the prices agreed by Rio are too small to cover extra shipping costs. Chinese mills, the world's 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 on June 25.
The price rise won by Rio is higher than the 65% to 71% increase agreed to in February by Cia. Vale do Rio Doce, the world's biggest iron-ore producer.
“Given Rio and BHP are both Australian suppliers, BHP is also likely to settle its iron ore deals at a similar level to Rio's,'' Lee Won Jae, a steel analyst with SK Securities Co, said from Seoul by phone. “Of more concern to steelmakers is whether Vale comes back to ask for more.''
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, China's central bank said last month. – Bloomberg
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