Japan Steels Accept Higher Australian Iron Ore Price

Japanese major steel makers including Nippon Steel and JFE Steel accepted maximum 96.5% higher iron ore price from Rio Tinto for shipment in fiscal 2008 starting April. They followed pricing by Baosteel Group last week despite of higher price than pricing with Vale earlier the year. The higher price could cost around 150 billion yen more for Japanese steels. The new FOB price is 144.66 US cents per dry metric ton unit for fine ore from Western Australia, which is 79.9% higher than previous year, and 201.69 US cents for lump ore, which is 96.5% higher. The price increased for 6 years in a row and the price increased to 5.2 times for fine and to 5.7 times for lump ore. Rio Tinto finally got the higher price than 65% hike agreed by major steels and Vale though the first price setter is followed by other players usually. Japanese steel resisted the higher price than so called benchmark but they accepted the higher price to secure the requirement under tight supply. Australian iron ore price is traditionally higher than Brazilian ore to reflect part of freight difference between Australia/Asia and Brazil/Asia. Australian miners seek higher price to reflect differentiation of freight in years and finally got the premium. Japanese steels have to settle the price with BHP Billiton and other suppliers in other sources including India and South Africa. If the other suppliers got the higher price, Japanese steel industry could pay 150 billion yen more compared with the value for 65% hike.