It is reported that Rio Tinto Group and BHP Billiton Limited may raise contract prices about 7% in the first quarter of 2011.

Quarterly prices are based on the three month average of index provided by the Steel Index with a one month lag period. The price of 62% iron ore arriving at Qingdao port averaged USD 145.95 a tonne, including shipping, from September 1st 2010 to November 25th 2010 as compared with USD 136.51 in the previous three months.

It may be recalled that Rio and BHP Billiton have abandoned annual pricing this year in favor of quarterly agreements as spot prices rose. Steelmakers in China, the world's biggest iron ore buyer, need to raise prices to pass on higher raw material costs as demand slows in winter.

Mr Xu Xiangchun chief analyst with Mysteel Research Institute said that "Steelmakers will face pressure from higher costs and eroding profits in the first quarter. Winter is a slow season for steel consumption as construction work in northern China normally will be suspended."

(Sourced from Arab Steel)