Brazil's Vale, Asian clients agree to 65 per cent price hike for iron ore

Brazilian mining company Vale announced a deal Monday that will raise iron ore prices 65 per cent for six major Asian clients amid booming global demand for the raw ingredient used to make steel.

Companhia Vale do Rio Doce SA, the world's biggest iron ore producer and owner of Canadian nickel giant Vale Inco, reached an agreement on the new price with South Korean steelmaker Posco and with Japan's Kobe Steel, JFE Steel Corp, Nippon Steel, Nisshin Steel and Sumitomo Metals.

It was the first price arrangement between a central ore producer and big steelmakers, a move that typically sets the bench-mark price for the industry.

Vale, formerly known as CVRD, said in a declaration that prices for iron ore produced at its Southern System mines would rise 65 percent. The price for high-quality ore from the company's Carajas mine in Brazil's Amazon will rise about 71 percent.

"The magnitude of the price growth for 2008 reflects the continuity of very tight conditions still prevailing in the global iron ore market," Vale said.

The deals have been hailed as positive for the world's three major iron ore miners - Vale, Rio Tinto PLC (LSE:RIO) and BHP Billiton Ltd. (NYSE:BHP) - and even for the steel producers. Many had been afraid the steelmakers could have been forced to agree on an even higher price increase given the strong demand for ore.