WSJ reported that Mount Gibson Iron Limited has set its contract iron ore prices in line with cuts agreed to last week between Rio Tinto Limited and Nippon Steel Corporation.

WSJ report cited Mr Luke Tonkin MD of Mount Gibson as saying that Chinese customers Shougang Corporation and APAC Resources Limited have acknowledged the price has been settled.

Mr Tonkin said that all the Perth based miner's long term iron ore contracts are set in line with the price Rio Tinto sets for its Hamersley product. He said that "Our customers are obliged under the contract to pay us the Hamersley price. The customer does not have the ability to come back and say they do not want to pay that price. That is the price."

Mr Tonkin said that he expected larger steel mills in China would be keen to settle at the Rio Nippon price to give them certainty of supply for the large quantities of high quality ore they require. He said that "My view is that those large steel mills that require quality feed and large volume will be looking very seriously at falling into line."

The Mount Gibson announcement could mark the first acceptance of the Rio-Nippon price as a new benchmark by a Chinese steelmaker, as Mount Gibson's customers include China's sixth biggest steelmaker, Shougang.

Mount Gibson's other customers are CITIC Australia Trading Limited, Marubeni Corporation of Japan and private European commodity trader Stemcor Holdings Limited.

(Sourced from WSJ.com)