RIZHAO Steel Holding Group has been ordered to pay an Australian iron ore miner US$114 million for breaching a long-term iron ore purchase contract in 2008, when the financial crisis slashed commodity prices.

Mount Gibson Iron Ltd, the miner, yesterday said an arbitrator decided on the award after finding Rizhao repudiated its obligations under the long-term agreement.

It's common for steel companies to default on term contracts and turn to the spot market where iron ore prices were much lower following the global financial meltdown, analysts said.

"That's why the world's top ore miners are moving to index-based pricing or quarterly negotiated prices from annual terms," Zeng Jiesheng, an analyst at Mysteel, said.

Shandong-based Rizhao had counterclaimed for wrongful termination of the term contract and for misleading and deceptive conduct, but both counterclaims were dismissed.

It has to pay Mount Gibson US$114 million in damages, plus an interest of 6 percent and Mount Gibson's legal costs.

Chinese mill Shougang Corp indirectly holds a stake in Mount Gibson.