CVRD closes iron ore price deal with Posco

Rio de Janeiro-based resources giant CVRD (NYSE: RIO) has continued setting the market for 2005 iron ore prices by reaching terms with South Korean steelmaker Posco. Posco agreed to a 71.5% increase in iron ore prices for Carajás and Southern System fines, FOB from the ports of Ponta da Madeira and Tubarão, CVRD said in a statement. The price accord is similar to one reached a day earlier between CVRD, the world's largest supplier of iron ore and pellets, and Japan's Nippon Steel. Posco, South Korea's largest steelmaker, has a long-term supply contract with CVRD and will receive 12Mt in 2005. CVRD, which publicly said it would seek a 90% increase in iron prices in this year's negotiations, appears to have set the market with the 71.5% increase over 2004's prices. Rio Tinto also reached a price agreement with Nippon Steel on a 71.5% increase. This follows on from the 18.6% price rise for iron ore contracts in 2004. China's insatiable demand for steel and raw materials has driven up prices on the global market and miners are starting to reap the benefits of higher prices reflected in steelmakers' recent profit reports. However, Luxembourg-based steelmaker Arcelor has resisted any substantial increase in negotiations with CVRD. Arcelor, the world's second-largest steelmaker, has a supply contract with CVRD for 20Mt in 2005 but has yet to agree on prices.