Rio Tinto Group, the world's second largest iron ore exporter, agreed to a 33 percent cut in contract prices with Japanese steelmakers, the first decline in seven years as the global recession slashes demand.

Nippon Steel Corp, the world's second-biggest steelmaker, agreed to pay Rio 97 cents a dry metric ton unit for its benchmark product for the year starting April 1, London-based Rio said yesterday in a statement.

Rio's shares reversed a decline and rival Australian iron- ore exporters surged on optimism the agreement will set a global benchmark for contract prices, which had risen more than fivefold since 1999.