Brazilian mining giant Companhia Vale do Rio Doce SA (CVRD) has agreed to a 9.5 percent increase to the price of iron ore it supplies to Italy's largest steel maker Ilva SpA, CVRD announced on Thursday.

Under the agreement, the Italian company will also pay 5.3 percent more in 2007 for CVRD's iron ore pellets, the raw material for steel.

CVRD, the world's top iron ore producer, has not yet announced 2007 prices with other European steel makers, but the Ilva agreement could be viewed as a benchmark.

On Wednesday, CVRD reached a similar agreement with South Korea's Pohang Steel Corp. and five Japanese steel makers. Earlier this month it also secured the same increase to its contracts with China's state-owned Baosteel Group Corp.

Iron ore prices rose about 19 percent in 2006, after soaring 72 percent in 2005.

CVRD expects to end this year with iron ore production of 263 million metric tons (290 million tons), and predicts it will produce 300 million metric tons (330 million tons) next year.