Local government officials take samples of imported iron ore for inspection at Rizhao Port in Shandong province. [Chen weifeng / China Daily]

BHP Billiton, Rio Tinto, Vale want 50% hike in long-term iron ore contract prices

Global miners have upped the ante in their forthcoming negotiations with Chinese steel mills by seeking a 50 percent increase in the long-term contract iron ore prices for 2010-11.

The tough stance adopted by BHP Billiton, Rio Tinto and Vale could put further pressure on the sagging bottom lines of Chinese steel mills, said industry sources.

Rio Tinto has asked for a 50 percent hike over the 2009 benchmark price, while BHP wants the ore it supplies to some steel mills to be priced at spot rates. Vale on the other hand is keen on a flat 50 percent increase based on the difference between the spot price and the 2009 benchmark price, said an executive who heads the iron ore department of a large State-owned steel mill.

"Baosteel, which is leading this year's ore talks, would wait and see how Japanese and South Korean steel mills react to the proposal before taking a decision in this regard as they do not want to be blamed subsequently for the steep rates," said the source.

"If other Asian steel mills accept the new ore prices, then Chinese steel mills will have no other choice but to accept the same as stopping production is not in the best interests of the industry."

China failed to reach an agreement last year with BHP, Rio and Vale after China's chief negotiator, the China Iron and Steel Association, insisted on a 45 percent discount over 2008 prices, rather than the 33 percent cut accepted by other Asian steel mills.

Domestic steel mills subsequently turned to the spot markets for ore supplies and many mills signed individual contracts with the big three miners after accepting the 33 percent cut without making it public.