Cia. Vale do Rio Doce, the world's largest iron-ore producer, insists China should accept an increase of 19 percent in ore costs, saying a lower rate wouldn't be fair on the company's other clients.

Reaching agreement with China's steelmakers, who account for 43 percent of global imports of iron ore, is just a matter of timing, Roger Agnelli, chief executive officer at Brazil's Vale said in an interview today.

China's steelmakers have been seeking to set prices for more than half a year after a record increase in 2005. Their bargaining position weakened on May 16 when Germany's ThyssenKrupp AG became the first steelmaker globally to agree to the new price.

Agreeing on an increase of less than 19 percent with China is "not fair to other clients," said Agnelli during a visit to Seoul, South Korea. "The market is showing that demand for iron ore is very strong," he said.

The 19 percent rise, which will apply to ThyssenKrupp, as well as mills in Japan, Taiwan and Korea from April 1 this year, is the second-biggest price jump in 25 years, according to ABN Amro Holding NV. Prices rose 71.5 percent last year. Rio de Janeiro-based Vale first asked for a 24.6 percent gain and the Chinese mills said they wouldn't pay any increase.

"There's been great changes in the steel and iron ore industry in recent years because of China and a great amount of investment is needed to catch up with demand," Agnelli said. "We're lagging behind demand."

Investment plans

Vale said it plans to invest $4.6 billion this year, the largest amount ever for a non-state-run Brazilian company. The company will increase output by 30 million metric tons this year and in 2007, after output more than doubled in recent years.

Baosteel Group Corp., which is representing China's steelmakers in the talks with Vale as well as BHP Billiton and Rio Tinto Group, may accept the 19 percent gain, a Baosteel executive involved in the talks said May 30.

Baosteel will meet with Vale, Rio Tinto and BHP this month, said the executive, who declined to be identified before the meeting takes place.

The three suppliers account for three quarters of global seaborne iron ore trade. Their bargaining position in the talks with mills was also boosted after cyclones and a rail disruption cut supplies from Australia and Brazil in the March quarter.

Chinese imports of iron ore have risen by 23.5 percent to 108 million tons in the first four months, the Beijing-based customs office said May 12.

Steel output in the country reached a record 38.3 million tons last month, an increase of 27.5 percent from a year ago, the Beijing-based Mainland Marketing Research Co. said May 17.