Baosteel, China's largest iron andsteel maker, said Monday it had agreed with Australian mining group Rio Tinto on a price increase of up to 96.5 percent for iron ore in2008, nearly double that of 2007.

    Baosteel, which negotiated on behalf of China's steel industry,agreed to a 79.88 percent price hike for Pilbara blend fines andYandicoogina fines and a 96.5 percent price rise for Pilbara BlendLump for the contract year starting on April 1.

    Prices will be 144.66 U.S. cents for per dry metric tonne unit ofPilbara blend fines and Yandicoogina fines and 201.69 U.S. cents forper dry metric tonne unit of Pilbara blend lump.

    Baosteel and Rio Tinco, the world's third largest iron oreproducer, agreed on the price hike after talks that "maintainedtraditional pricing mechanism and normal market order, and kept thelong-term friendly cooperation between the upstream and downstreamsectors", the China steel giant said in a statement.

    The agreement represented the sincerity from the two sides tomaintain the traditional pricing mechanism and was a result of thejoint efforts of the responsible businesses, according to thestatement.

    "Chinese steel firms will support Rio Tinto to increase investmentand output to meet market demand," Baosteel said.

    Baosteel agreed as early as in February on a 65 percent price risefor iron ore imports from Brazilian miner Vale, the world's largest.

    Rio Tinto and larger rival BHP Billiton have then required for a"freight premium", claiming that it costs less to ship iron ore fromAustralia to China.

    Chinese steel makers have accepted huge price rises for sixconsecutive years, driven up by huge increases in demand.

    China imported 1.34 billion tons of iron ore between 2003 and 2007,42 percent of the total world shipments in the five years.

    The country's crude steel output more than doubled to 490 milliontons in 2007 from 220 million tons in 2003.