China's largest steel producer, the Shanghai-based Bao Steel, and world's major iron ore provider, the Australia-based BHP-Billiton, have reached an agreement on the iron ore price for 2005, according to the Ministry of Commerce.

An official with the ministry said here Wednesday that BHP had given up its earlier demand for a higher delivery fee and had agreed to accept the same price increase level as other iron ore providers, such as Rio Tinto and Brazil's CVRD.

China accepted a record 71.5 percent rise in iron ore prices from BHP's rivals in February this year after Japanese firms agreed to the increase.

But BHP sought a higher freight premium on iron ore sold to China on top of the 71.5 percent price rise. The Chinese steel companies have rejected the push.

The ministry said that the reaching of agreement would bring the negotiation on iron ore prices back to the current international price-setting mechanism and would be conducive to the international trade.

Iron ore has been an important part of Sino-Australian trade. Australia is the largest exporter of iron ore to China. The Chinese Ministry of Commerce has encouraged domestic steel companies to set up long-term and stable relations with the Australian iron ore providers under the win-win principle.

Source: Xinhua