Rio Tinto, Nippon agree 33 percent cut on fine iron ore price

Under the agreement, the new price is US cents 97 per dry metric ton unit for Pilbara Blend Fines and Yandicoogina Fines, down 33 percent compared to last year's price of US cents 144.66, and the new price is US cents 112 per dry metric ton unit for Pilbara Blend Lump, a drop of 44 percent compared to the 2008 price of US cents 201.69.

Commenting on the deal, Rio Tinto Iron Ore chief executive Sam Walsh said, "Rio Tinto is pleased to reach this agreement today with Nippon Steel, Japan's leading steelmaker. We believe this settlement is a realistic outcome for both parties - one that reflects the global market for iron ore and the current challenging market conditions facing our customers."  

This is the first deal of the current year. The other Australian major miner BHP Billiton is still negotiating on the 2009-10 prices, while their Brazilian rival Vale has said that it will wait until the Australian miners set new prices before committing to a new rate with its clients.

The price cut announced by Rio Tinto and Nippon is not as deep as the Chinese steelmakers insist on, and it remains to be seen if the Chinese side will accept the settlement as a benchmark for the year or hold out for further price reductions. The China Iron and Steel Association (CISA) recently said that China would not accept less than a 40 percent price cut.