Rio Tinto said the Japanese had agreed to the 19 percent increase in prices for iron fines for the year beginning April 1, but that negotiations were still continuing over lump prices.

"This year's pricing reflects the current international market, which is characterised by extremely tight supply and a continuing high level of demand," Rio Tinto's iron ore group chief executive Sam Walsh said.

The price hike follows the announcement by the world's biggest iron ore producer, Brazil's CVRD, on Monday that it had won a 19 percent increase in the iron ore price from Germany's biggest steelmaker, Thyssen Krupp Stahl.

That rise was at the upper end of analysts' expectations of a 10-20 percent increase after a record 71.5 percent hike in iron ore prices last year.

The price pressure reflects the heavy demand for steel, notably to feed China's huge economic boom.

In the wake of the CVRD-Thyssen deal, analysts predicted that Asian steel producers would have to follow suit and swallow another 19 percent price hike.

But China has argued that it should not be held to the CVRD benchmark following last year's record price rise.

But ABN Amro mining analyst Rob Clifford said the agreement between Rio Tinto and the Japanese meant the Chinese would find it difficult to hold out in the negotiations, which should have concluded by April 1.

"My view is that they are running out of arguments at this point and the most likely outcome is that they will have to capitulate," he said.

Clifford said a benchmark price had now been set and other firms like Australian industry leader BHP Billiton would soon follow.

He called the 19 percent boost a "cracking result" for miners, the second biggest yearly increase ever won.

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