Rio Tinto and BHP seek to raise iron ore prices by 23%

Rio Tinto and BHP Billiton have notified Japan's steelmakers that they want to raise iron ore prices by 22-23 per cent in July-September from the previous quarter, a source said, sending shares of Japanese mills to lows for the year.

Such a price rise to about $147 (Dh540) a tonne – roughly in line with the recent spot market trend – would be a further blow to Japanese mills, whose shares are reeling amid worries about the global economy and the outlook for demand as well as weaker steel prices in Asia, their biggest export market.

"There's nothing but bad news," said Credit Suisse analyst Shinya Yamada. "Investors are fretting about a possible squeeze in margins at steelmills as product prices could sag while raw materials prices stay at a high level."

Shares of Nippon Steel, the world's second-biggest steelmaker, fell one per cent to an eight-month low of ¥303. JFE Holdings, the world's number six mill, lost 1.1 per cent to a seven-month low of ¥2,860. The broader market rose 0.2 per cent.

The price hike, the second consecutive quarterly increase, would make the July-September iron ore price more than double the price for the 2009 financial year, and follows Japanese steelmakers' agreement with BHP to raise the coking coal price for the quarter by 75 per cent from a year earlier.

Japanese mills have yet to agree to the request from Rio and BHP, the world's second- and third-biggest iron ore miners, respectively, the source said. But the Japanese companies are likely to settle for a price close to the proposed figure.

Follow Emirates 24|7 on Google News.