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1st Major Contract In Steel Industry This Year

RIO Tinto Ltd, the world's third-largest miner, yesterday said it has agreed with Nippon Steel Corp, Japan's biggest steel maker, to cut its iron ore prices by more than a third for this year.

Rio Tinto agreed to sell its Pilbara and Yandicoogina fine ores at 97 US cents per dry ton unit versus 144.66 cents last year, a cut of 33 percent.

Higher-quality lump ore will sell for 112 cents a ton, down nearly 45 percent from 201.69 cents. Overall, the blended average price cut - which applies to all iron ore delivered during the year from April 1 - was 37 percent.

This is the first major contract announced in the steel industry this year.

BT Investment Management resources analyst Tim Barker said the new contract prices were higher than some commentators had tipped and that other producers would probably follow Rio Tinto's lead.

But Chinese steel makers would probably hold out for a better deal. "I don't think there will be a quick settlement with the Chinese," Barker said.


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