Mumbai: The Rio Tinto Group, the world's second-largest iron ore exporter, has finalised iron ore contracts with Asian steelmakers at a 97 per cent premium, putting pressure on rival BHP Billiton Ltd to hike prices and fueling inflation fears.
 
The agreements for the financial year that began on 1 April match prices agreed on 23 June with Baosteel Group Corporation, China's biggest mill, the London-based company said in a statement.

The price hike that Rio won is higher than the 65-71 per cent increase agreed to in February by Cia Vale do Rio Doce, the world's biggest iron-ore producer. Rio will get an additional $7.45 a tonne on top of the $65 a tonne that Vale will be receiving for its fines in China.

"These agreements are a strong endorsement of the settlement reached last week and reflect the very strong demand for our products across the world's fastest-growing markets," Sam Walsh, Rio's iron ore chief executive, said in the statement.

The price rise means the annual value of Australia's iron ore exports will surge to more than $35 billion, up from $20 billion in the previous year.

Posco, Asia's third-biggest steelmaker, also agreed to pay Rio as much as 97 per cent more for iron ore this year, company sources said.

Iron ore prices have recorded a four-fold increase since 2001, raising costs for mills like South Korea's Posco that have no supply sources, stoking inflation in the process.

BHP Billiton Ltd, the third-largest exporter of the ore, which is reported to be holding out for an even higher price, hasn't concluded price talks yet.

Rio Tinto is increasing production from its Pilbara operations in Western Australia from 145 million tonnes to 320 million tonnes a year by 2012 and to 420 million tonnes a year beyond that, the company said.

BHP, the world's largest mining company, said the prices agreed by Rio are too small to cover extra shipping costs.

Nippon Steel last month raised contract prices of steel plate for domestic shipbuilders and machinery makers by a record 40 per cent even as rising prices of raw materials, including iron ore, are fuelling concerns about inflation across Asia.