BHP Billiton Ltd. said Friday that China's Baosteel, negotiating on behalf of the Chinese steel industry, agreed to price hikes of up to 96.5 percent for iron ore supplies this year following protracted negotiations.
The increase is in line with an agreement Baosteel made last month with Rio Tinto, another major supplier, and comes as surging global demand for steel has squeezed iron ore supplies and sharply boosted prices.
Prices will rise 79.88 percent for iron ore fines and 96.5 percent for iron ore lump and are retroactive to April 1, BHP Billiton said.
"We are happy to have been able to settle the prices announced with one of our most important customers and we've been particularly pleased with the spirit in which both Baosteel and BHP Billiton undertook negotiations," said Marcus Randolph, BHP Billiton's chief executive for ferrous and coal, in the statement.
"At the end of what has been a long process, we believe our relationship with our customers remains as positive and strong as ever."
Chinese steel mills have banded together to negotiate with iron ore suppliers in recent years in hopes of getting a better deal. But they still have been forced to accept big annual price increases in each of the past six years.
China is the world's biggest producer and consumer of steel. Growth has been driven by a surge in demand from the country's thriving export industries and a construction boom that is remaking dozens of Chinese cities.
BHP Billiton shares rose by more than 2 percent to close at 40.70 Australian dollars on Friday in Australia.
Rising demand for iron ore has brought a financial windfall for suppliers such as Rio Tinto, BHP Billiton and Brazil's Companhia Vale do Rio Doce SA. All are investing heavily to increase output.
Baosteel agreed in February to a 65 percent price hike with Vale on behalf of Chinese mills. Last month, Baosteel agreed to pay Rio Tinto increases of 78.9 to 96.5 percent for various grades of iron ore in the 2008 buying year.
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On the Net:
BHP Billiton Ltd.: http://www.bhpbilliton.com
Rio Tinto PLC: http://www.riotinto.com
Baosteel Group (in Chinese): http://www.baosteel.com
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