Rio Tinto Group, the world's second-largest iron ore exporter, agreed to a 33 percent cut in contract prices with Japanese steelmakers, the company said Tuesday, making it the first decline in seven years as the global recession slashes demand.
Nippon Steel Corp. agreed to pay Rio 97 cents a dry metric ton unit for its benchmark product in the year started April 1, London-based Rio said. Goldman Sachs had forecast a 40 percent drop from last year's record.
Rio's shares reversed a decline and rival Australian iron-ore exporters surged on optimism the agreement will set a global benchmark for contract prices, which had risen more than fivefold since 1999. Chinese steel mills, the world's biggest producers, are likely to resist the accord after calling for prices to be as much as halved.
"What looks like a pretty good deal might end up being a bit tougher when they come across the Chinese," said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. "Historically you could say this is a done deal, when Rio strikes with Nippon, well everyone follows, but I get a feeling maybe the Chinese have got something else in store."