Japan Integrated Steels Agree with Rio Tinto on Iron Ore Hike

Japanese integrated steel makers such as Nippon Steel and JFE Steel agreed with Hamersley Iron, iron ore producer, Rio Tinto’s subsidiary, last week to increase purchase price for powder and lamp iron ore by 9.5% for shipment in fiscal 2007 starting April 2007 from previous year. Japanese steel makers already reached basic price agreement with BHP Billiton and will agree with Australian and Brazilian major iron ore producers. The price up was predicted seeing the result of price negotiation between Bao Steel of China and major iron ore producers at the end of last year. Japanese steel industry will take total 80 billion yen of cost up for iron ore purchasing in fiscal 2007 from fiscal 2006, when Japan owes 80% of iron ore import to Australian and Brazilian major iron ore producers. Their contracted powder iron ore price increases by FOB US 80.42 cents per dry metric ton unit, which represents US$ 50.7 per tonne for ore with 63% Fe in fiscal 2007 shipment and the lamp iron ore price is FOB US 102.64 cents per dry metric ton unit. The breadth of upsurge for their contracted price was 71.5% in fiscal 2005 from fiscal 2004, which was 19% in fiscal 2006 shipment. However, the breadth of upsurge in fiscal 2007 rise by 2.9 times from fiscal 2006, and which increase for 5 consecutive years. Following price hike agreement between Bao Steel and major iron ore producers such as CVRD in Brazil, Japanese integrated steel makers agreed the purchase price hike for powder iron ore with CVRD in December 2006. Japanese integrated steel makers negotiated with BHP Billiton for the purchase price of iron ore last week, which will develop the details and will agree with BHP Billiton soon. They are expected to decide the purchase price with Australian iron ore producer, Rove River, Rio Tinto’s subsidiary, after this week.