BHP last to sign iron ore price pact with Baosteel

By James Regan and Nao Nakanishi

SYDNEY/HONG KONG (Reuters) - BHP Billiton (BHP.AX)(BLT.L) has matched takeover target Rio Tinto (RIO.AX)(RIO.L) with a near doubling in contract iron ore prices, ending months of talks and speculation it may get more.

BHP said on Friday it had secured a 96.5 percent increase for iron ore lumps and a 79.88 percent increase for fines from China's Baosteel (600019.SS) for 2008-09, and would roll these out to other customers in Asia.

It indicated the protracted talks were unlikely to tarnish its relations with customers, whom it is trying to persuade to support its hostile bid for Rio.

"At the end of what has been a long process, we believe our relationship with our customers remains as positive and strong as ever," BHP's chief executive for ferrous and coal operations, Marcus Randolph, said in a statement.

Baosteel and other steelmakers have told BHP Chief Executive Marius Kloppers they are worried that a combination of BHP and Rio would have too much power in setting the price of iron ore, the main feedstock for steel.

China already takes half of all the ore that BHP mines. BHP, Rio and Brazil's Vale control about 70 percent of the iron ore that China buys.

"For the industry from mills to iron ore producers, everyone wins," Judy Zhu, analyst at Standard Chartered Bank, said earlier on Friday as word of an agreement started to leak out.

"Iron ore producers will make more money and the steel makers, although they are paying more for their raw materials, will be able to pass these higher costs to their customers. It will be downstream users who will have to bear higher prices."