Rio Tinto Agrees to 33% Cut in Iron Ore Price

Global miner Rio Tinto has agreed a 33 percent cut in contract fine iron ore prices with Japan's Nippon Steel for the current shipping year, Rio said in a statement on Tuesday.

Rio said it will sell Pilbara and Yandicoogina fine ores for 97 U.S. cents per dry metric tonne unit versus 144.66 cents last year. Lump will sell for 112 cents a tonne, down from 201.69 cents.

The agreement with Nippon Steel is the first between a major miner and a steel mill, and sets a benchmark likely to be adopted globally.

China's steel mills had been looking for steeper cuts amid a slump in demand, with China Iron and Steel Association telling its members not accept cuts less than 45 percent from Australian iron ore miners including Rio and BHP Billiton .

BHP Billiton declined to comment on its price talks. 

Yet Chinese steel production volumes have remained strong, helped by fiscal stimulus policies in China to boost domestic demand and infrastructure development.    

Rio Tinto's iron ore chief executive, Sam Walsh, told a mining conference in Canberra on Tuesday that demand for ore from China had been strong in recent weeks, helped by the closure of high cost iron ore mines in China.

"That's has opened up an opportunity for us and I'm very pleased to say that for the last six weeks our operations have been running absolutely flat out," Walsh told reporters on the sidelines of the conference.

Analysts had been expecting cuts in benchmark prices for the year that started on April 1 of between 30-45 percent which would be sufficient to keep high cost Chinese mines from re-opening.

Last year Rio Tinto and BHP won 96 percent increases in prices for iron ore produced at their Pilbara mines in Western Australia while Brazilian miner Vale gained a 71 percent rise after it settled ahead of its rivals.

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Vale last week said it had not started negotiations to settle prices with steelmakers, saying this year it preferred to wait for BHP and Rio Tinto to settle first.

"Whatever they decide (on prices), we'll analyze. If it interests Vale, we'll follow. If it doesn't, then we'll see what can be done," said Jose Carlos Martoins, Vale's executive director for ferrous minerals.

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