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SYDNEY: Anglo-Australian mining giant Rio Tinto announced Tuesday
that it had reached agreement with all its customers in Asia for
iron ore price increases of up to 97 percent.
The new settlements are in line with Rio’s
agreement announced last week with China’s Baosteel, which saw
lump prices increase by 97 percent and fines prices increase by 80
percent, the company said.
“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,”
said Sam Walsh, chief executive of Rio Tinto’s Iron Ore group.
“The agreements throughout Asia will provide
an important platform as we embark on the largest expansion in Rio
Tinto Iron Ore’s history, increasing production from the Pilbara
to 320 million tons of iron ore per annum in 2012 and 420 million
tons per annum beyond that.”
The settlements are for iron ore deliveries from
Hamersley Iron, Robe River and Hope Downs for the contract year
starting on April 1, 2008, the company said in a statement.
Rio Tinto shares closed up 2 dollars or 1.48
percent at 137.50 dollars (US$132.21) on the Australian stock
exchange, while BHP Billiton put on 70 cents to 44.40.
There was no immediate reaction from BHP
Billiton, the world’s biggest miner, which has launched a
$147-billion takeover bid for Rio and has not yet announced its
contract prices for this year.
After Rio’s earlier agreement with Baosteel,
BHP chief executive of ferrous and coal Marcus Randolph said the
settlement was “progress” but failed to achieve a freight
premium.
Rio and BHP have pursued such a premium for
their iron ore from Western Australia’s Pilbara region, arguing
that it is much cheaper to transport into Asia than ore from other
regions, such as Brazil.
Brazilian giant Vale, the world’s largest
producer of iron ore, has agreed with steelmakers to price rises
between 65 percent and 70 percent for its ore in 2008.
Macquarie Research Equities analysts said the
Rio Tinto settlement was “reflective of the geographic
value-in-use of Australian ore and a premium for ore quality.”
“While solid progress has been made in
reducing the Australian discount, there is still scope for more,”
Macquarie added in a note to clients.
Iron ore prices have risen for six consecutive
years as demand for the steel-making ore is driven by rapid
development of China and other developing nations.
Faced with this price escalation, Chinese
interest in Australia’s resources sector has lifted, with
Beijing’s Sinosteel on the verge of completing a hostile takeover
for iron ore miner Midwest.
China’s state-controlled aluminum company
Chinalco also combined with Alcoa to buy a nine percent stake in Rio
Tinto for $14 billion in February in response to BHP Billiton’s
takeover offer for the firm.
Australia’s treasurer said last week, however,
that while it welcomed foreign investment from China it would
protect its national interest.
The comments by Treasurer Wayne Swan followed
reports that the government planned to limit sovereign
funds—investment bodies owned by foreign governments—to
49.9-percent stakes in local firms.
-- AFP
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