BHP BILLITON has settled on a price for the steel making commodity in line with that received by rival Rio Tinto.
BHP Billiton has reached an agreement with Baosteel, which acts on behalf of China's steel industry, for an 79.88 per cent increase in the price of iron ore fines and a 96.50 per cent increase in the price of iron ore lump.
This is the sixth consecutive annual increase in iron ore prices, as demand for the steel making commodity continues to be driven by the rapid urbanisation of China and India.
"We will now seek to settle agreements with the remainder of our customers under existing long-term supply agreements both in China and other countries,'' BHP Billiton marketing president Tom Schutte said in a statement.
Shares in BHP Billiton, which is pursuing a $US158 billion ($164.67 billion) all-scrip takeover of Rio Tinto, gained 88 cents, or 2.21 per cent to close at $40.70.
Rio Tinto put on $3.75 cents to $125.70.
BHP Billiton's settlement with Baosteel, China's largest steelmaker, is higher than that achieved by Brazilian giant Vale, which agreed with steelmakers to price rises between 65 per cent and 70 per cent for its ore in 2008.
Vale's settlement would have generally been accepted by producers and steelmakers as the benchmark contract price for the year, but Rio Tinto and BHP Billiton had held out for a premium.
BHP Billiton and Rio Tinto have said that a "freight premium'' should be added to their iron ore in Western Australia's Pilbara region because it was much cheaper to export into Asia than from other regions such as Brazil.
"These may well be the last full, formal benchmark talks, before a range of iron ore indices are implemented,'' Merrill Lynch analysts led by Vicky Binns said in a June 26 client note.
The price agreement between Baosteel and BHP Billiton will apply to the contract year that started on April 1.
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