In other news, Japanese steelmakers have agreed to a 65 percent hike in the average annual price they pay for iron ore.
Japanese Mills Agree 65% Iron Ore Gain, Person Says (Update1)
By Yoshifumi Takemoto and Jesse Riseborough
Feb. 18 (Bloomberg) — Japanese steelmakers agreed to a 65 percent increase in annual iron ore prices, a Japanese steel company official said, setting a global benchmark for prices of the steelmaking raw material.
The increase will apply for the 12 months from April 1, said the official, who declined to be named because the talks are confidential. Reuters reported earlier that Tokyo-based Nippon Steel Corp., Japan’s biggest steelmaker, agreed to the increase, citing industry executives and a Chinese steel industry Web site.
Iron ore prices will rise for six years to a record as China boosts output of steel, helping Cia. Vale do Rio Doce, Rio Tinto Group and BHP Billiton Ltd. post record profits. Prices may rise as much as 70 percent because of a global supply deficit, Credit Suisse Group said last month.
“A 65 percent increase in a revenue line is going to be a big kicker” for iron ore producers, said Mark Pervan, a senior commodity strategist at Australia and New Zealand Banking Group Ltd., said today by phone from Melbourne. “They are going to get a least half of that back in profit.”
Melbourne-based BHP fell as much as 80 cents, or 2 percent, to A$38.49 and traded at A$38.92 at 12:03 p.m. Sydney time on the Australian Stock Exchange. Rio declined 2.2 percent to A$134.92. Nippon Steel climbed 3.8 percent to 578 yen as of 9:48 a.m. on the Tokyo Stock Exchange. Rival steelmakers also surged, fueling a 4.1 percent advance in the Topix Iron & Steel index.
“We don’t comment on speculation,” Ian Head, a spokesman for Rio said today by phone from Melbourne. “We just don’t comment on iron ore negotiations,” Samantha Evans, spokeswoman for Melbourne-based BHP said today by phone. Rio and BHP are the world’s second-and third-largest exporters of the ore. Masato Suzuki and Hayato Uchida, spokesmen for Tokyo-based Nippon Steel, were unavailable for immediate comment.