Anger as Billiton wins iron ore price rise

ANGLO-Australian mining giant BHP Billiton was forced to settle for a 71.5% increase in its 2005 contract year iron ore prices today, in line with competitors Rio Tinto and Brazil's CVRD but short of the rise it sought.

BHP Billiton, headed by Chip Goodyear, has been in increasinglyacrimonious negotiations with north Asian and Chinese steelmakers. It argued that it deserved a big rise to recognise the freight advantages of using Australia ore.

But the Chinese, led by Baosteel, mounted fierce opposition, saying they were confident they could secure ore from other companies.

BHP Billiton, Rio and CVRD's hands have been considerably strengthened by surging demand worldwide, but today's agreement draws a line in the sand.

BHP Billiton wanted an extra $US7.50-$US10 a tonne to reflect cheaper freight for Australian iron ore relative to Brazilian production. That would have pushed the price to $50.41 a tonne, more than double the present price. But its argument proved harder to support after Rio, which also sources its ore in Australia, settled.

Critics of the BHP Billiton approach say it has risked a customer backlash that could affect all suppliers.

The China Iron and Steel Association has already reacted angrily and called a meeting for late this month to ask more than 70 Chinese steel importers to co-ordinate their policies.

Liu Jie of Anshan Iron and Steel Group said the tough bargaining exposed the weak points of China's domestic steel industry. He called for more co-operation to secure investment to increase local production.