(LEAD) POSCO agree 33 pct cut in iron ore price with Rio Tinto

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By Park Sang-soo
SEOUL, May 28 (Yonhap) -- POSCO, the world's fourth-largest steelmaker, said
Thursday that it has agreed to a 33-percent reduction in contract prices with Rio
Tinto Group, the world's second-largest iron ore exporter, heralding further cuts
in steel prices.

Under the agreement, retroactive to the contract that began on April 1, POSCO
will buy iron ore fines for US$58.2 per ton, down 32.9 percent from last year's
level, according to POSCO.
POSCO also agreed to purchase iron ore lump for $68.8 per ton, down 45 percent
from a year earlier.
POSCO had been demanding a deeper cut of up to 50 percent in contract prices, but
global iron ore exporters wanted a cut of around 20 percent.
POSCO, which imports up to 50 million tons of iron ore annually, is expected to
reach an agreement on contract prices of iron ore with other major iron ore
exporters such as BHP Billiton Ltd. and Vale SA.
Shares of POSCO closed at 406,000 won ($323) on the Seoul bourse, up 2.78 percent.
Prices of iron ore, from which metallic iron can be economically extracted, have
been falling as demand dropped in line with the global economic slump.
Decreased iron ore prices, which have fallen for the first time in seven years,
could help boost margins for POSCO, which cut production for the first time in
its 40-year history in December, analysts said.
Early this month, POSCO slashed prices for all its steel products by 20 percent
to reflect falls in the cost of raw materials.
POSCO said the steel price cuts may reduce annual sales by 2.7 trillion won.
The steel mill reported earlier that its first-quarter profit tumbled 69 percent
from a year earlier to 325 billion won due to declining demand from automakers
and builders.
sam@yna.co.kr
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