BRAZILIAN mining giant Vale has proposed a more than 90 per cent increase in iron ore prices in negotiations with Japanese steelmakers for fiscal 2010, The Nikkei reported today.

Vale is the world's largest iron ore producer, supplying roughly 30 per cent of all iron ore transported by sea. It sold the raw material at about $US55 a tonne in fiscal 2009.

Although prices had been negotiated for full fiscal years in the past, the prices that it proposed are for the April-June quarter.

Spot prices for iron ore are currently in the $US130 range partly due to increased Chinese demand. Japanese steelmakers are opposed to prices of more than $US100, but it is likely that the parties will agree on prices higher than the record of about $US79 set in fiscal 2008.

Japan imported 128.5 million tonnes of iron ore in fiscal 2008.

Should prices be raised by 90 per cent for all of fiscal 2010, the nation's steel-making industry will see costs grow by some Y570 billion ($6.9bn) compared to the previous year.

Prices for some types of coking coal, another key raw material for making steel, are already set to rise by 55 per cent. Steelmakers are poised to pass on the higher costs to large customers such as carmakers.

Japanese steelmakers have recently accepted a proposal by mining giant BHP Billiton to set some coking coal prices quarterly instead of annually. Should this practice spread to iron ore, it could result in steel prices being set every three months instead of once a year.

Source: The Australian