Baosteel accepts iron ore import price rise

Baosteel Group Corp. will pay 144.66 U.S. cents a dry metric ton unit for so-called Pilbara blend fines in the year that began April 1, up 80 percent from a year ago, Rio said today in a statement. Pilbara blend lump will rise 97 percent to 201.69 U.S. cents a dry metric ton unit for the Shanghai-based steelmaker. The contract marks the first time Chinese buyers have agreed to pay more for Australian ore than supplies from Brazil, which are costlier to ship.

Chinese mills have so far failed to arrest six years of increases in the cost of the steelmaking raw material. The higher prices for iron ore will help Rio defend itself against a $171 billion hostile bid from BHP Billiton Ltd., the world’s largest mining company.

“They have achieved a freight differential,” Andrew Keen, an analyst at Sandford C Bernstein Ltd. in London, said today in a telephone interview. “The underlying market is very positive.”

Rio and BHP have demanded higher prices than Brazilian rival Cia. Vale do Rio Doce because their Australian ore costs less to ship to Asia. Vale, the world’s largest exporter of the raw material, said in February it won an annual gain of between 65 percent and 71 percent.

For more in depth analysis on the iron ore price increases and the Chinese Steel Industry, please visit our In Focus feature.