MercoPress. South Atlantic News Agency

China agrees to pay double for BHP Billiton iron ore

Mining giant BHP Billiton has reached a deal with China's largest steelmaker to almost double iron ore prices. Under the agreement, covering contracts for one year from 1 April 2008, BHP will increase its prices by up to 96.5% for deliveries to state-owned Baosteel.

The news comes days after BHP's rival Rio Tinto secured similar price rises with Chinese and other Asian firms. Deals by the two groups are closely watched as they determine what smaller firms can expect to charge each year. After announcing the deal at the Australian stock exchange, Anglo-Australian firm BHP added that it hoped to secure further agreements with other customers in China and Asia. Soaring demand from China and rising commodity prices have led to strong profits for mining firms, who are in turn pumping more money into boosting output Meantime in Brussels it was announced that the European Commission has opened an in-depth probe into mining giant BHP Billiton's 170 billion US dollars unsolicited bid for rival company Rio Tinto. A tie-up between BHP and Rio would create a firm with a third of the world's iron-ore market, raising fears that it would be too powerful. The EU listed its concerns but said BHP would be able respond, adding the findings had not been pre-judged. Rio has fended off the offer, saying it did not meet the value of its assets. Besides iron ore, the commission raised concerns over the markets for coal, uranium, aluminum and mineral sands, saying the proposed takeover could result in higher prices and reduced choice for customers of the two companies. EC Competition commissioner Neelie Kroes added that the products made by the two firms were the key components of many major European industries. "The recent surge in commodity prices has had a serious impact on the industries buying these commodities, their customers, and ultimately all the consumers in Europe and elsewhere in the world" she said. The commission's role was "to ensure that this takeover does not adversely affect competition in Europe", Ms Kroes added. BHP Billiton is offering 3.4 of its shares for each Rio Tinto share, which Rio is strongly resisting. United States regulators have approved the deal but, like the EU, Australia's regulators are also sceptical.