Steelmakers throughout Asia cringed earlier this week when they heard the news that Aussie mining giant Rio Tinto PLC (ADR: RTP) had secured a 97% price increase for its iron-ore.

But getting Rio out of the way was only half the battle, because now steelmakers are forced to confront BHP Billiton Ltd. (ADR: BHP) and its chief executive, Marius Kloppers, who may not be so easily placated.

It was Kloppers who first launched the campaign to charge Asian steelmakers a freight premium based on Australia’s proximity to the market. At the time, Kloppers was just the chief commercial officer at BHP and lacked enough clout to drum up support for his plan. But as the price of iron ore escalated, Rio Tinto came around and backed Kloppers’ play this year, forcing Chinese steelmakers to pay the a convenience premium for Australian ore.

Monday, Rio and Baosteel Group Corp., China’s largest steelmaker, announced they had reached an agreement to raise iron-ore contract prices by 80% to 97%. That bested Brazil’s Vale (ADR: RIO) which earlier secured a 70% increase for the price of its ore. It was the first time Chinese buyers ever agreed to pay more for Australian ore than supplies from Brazil.

Many analysts believe it’s only a matter of time before BHP follows suit and signs on to the same 97% price increase obtained by Rio. But not everyone is so sure.

Recent remarks from BHP executives have indicated that the company isn’t satisfied with the increase, and may hold out for more.

“We are delighted to see that progress,” Marcus Randolph, chief executive officer of the ferrous and coal units of BHP, said Monday at a presentation in London. “It doesn’t cover the full $40 to 50 difference on freight.”

“The freight differential has been $55 to $60, while their settlement implies a premium for freight of a little under $7.50. It’s an improvement but it hasn’t closed the gap,” Randolph said.

Aside from a higher freight premium, BHP is seeking to abolish annual contracts entirely and shift to a system based on spot prices.

“The beauty of an index is that it doesn’t result from a wrestling match between buyer and seller about what’s fair,” Randolph said. “It actually results from a large number of trades that occur between independent parties.”

However, the Asian steelmakers negotiating with BHP don’t seem inclined to give up anymore than they already have.

“There are big differences between what we want and what they are requesting,” South Korea’s Posco (ADR: PKX) said earlier this week referring to negotiations with BHP.

One official familiar with the talks recently told Bloomberg News that any attempt by BHP to link contract prices to higher spot prices would be rejected.

While neither party would like this standoff to last a moment longer than it has to, it seems clear that BHP will not be satisfied to merely accept terms equal to those agreed on by rival Rio Tinto.

Source: Rio Strikes While the Iron is Hot, but BHP Holds Out for More