Chinese steel mills would accept a hike of 71.5 percent in iron ore prices after Tuesday��s benchmark deal between Brazil��s CVRD and Japan��s Nippon Steel Corp., shipping and trade sources said Wednesday.

Chinese trade sources said an agreement had been reached with Brazil��s mining and metals group Cia Vale do Rio Doce (CVRD) that Chinese mills would accept a price increase in line with the first major Asian deal.

Baosteel was still in negotiations with suppliers, an official from China��s top steel producer Baoshan Iron and Steel Co. Ltd. said Wednesday.

An official with second-largest producer Anshan New Steel Co. Ltd. denied that Angang had reached a deal on iron ore prices.

There will be further negotiations between individual Chinese steel mills and Australian miners, including BHP Billiton and Rio Tinto Ltd. over freight charges, the shipping sources said.

With China's 2004 iron ore imports totaling 208 million tons, up 40.5 percent from the previous year, the country is now the world��s top importer of the raw material.

"After Japan reached a deal with the suppliers, Chinese mills will follow suit," said a trade source.

Yet market sources on the mainland and Hong Kong said the agreement with CVRD meant Chinese steel mills would pay about US$80 a ton for iron ore from Brazil, including freight. They paid about US$20-21 a ton in 2004 on a free-on-board basis.

BHP and Rio Tinto were asking for charges of up to US$10 a ton in addition to a 71.5 percent increase in free-on-board prices due to Australia��s closer shipping distance and better ore quality, they said.

While freight would cost US$40 a ton or more from Brazil to China, it is only about US$20 a ton from Australia, they said. Unless Chinese mills agree to the surcharges, Australian mines are prepared to reduce shipments to China this year. Enditem

Source: Shenzhen Daily/Agencies