Chinese steel makers have agreed to pay record prices for iron ore from the remote Pilbara region of Western Australia. In a deal signed this week, Australian mining giant Rio Tinto has secured increases that almost double the price of some grades of the mineral. From Sydney, Phil Mercer reports.
Australia's resources boom shows no sign of slowing down, thanks largely to demand from Asia.
This week Anglo-Australian minerals company Rio Tinto has been negotiating with China's biggest steel maker, Baosteel, which has traditionally set the international iron ore price for China's other steel producers.
In 2007, the Chinese imported 383 million tons of iron ore, up 17 percent from the previous year.
In the past, China has paid Brazilian and Australian exporters the same amount for minerals. But this year Australian miners demanded more, insisting their iron ore is higher quality and - because Australia is closer to China - is costing less to transport.
Rio has secured an 80 percent price increase for the iron ore known as Pilbara fine and a 97 percent increase for iron ore lumps from its operations in northwestern Australia - 10 times last year's percentage increase. The scale of the deal has surprised many analysts.
A spokesman for Rio Tinto said the deal was "very significant," as iron ore is one of the company's key commodities, along with copper and aluminum.
Rio Tinto chief executive Tom Albanese believes more good times lie ahead for his company.
"Overall, Rio Tinto believes that this global shift will see the size of our key markets double over the next 15 years, as demand balloons in line with rising urbanization in developing countries. And, that is also very good news for Australia," said Albanese.
Australia's mining boom has fueled a decade-and-a-half of unprecedented economic growth.
It is driven by soaring demand for iron ore and coal from China and India.
The bonanza has the potential to end Australia's long-term current account deficit and push the country's international trade balance into surplus.
But despite such massive earnings in the minerals sector, there are fears that the higher income from exports could increase inflation in Australia and push up domestic interest rates.
But Australia's mining boom has cushioned the economy from the worst effects of the global credit squeeze.