BHP Billiton Ltd. (BHP) said Thursday it has signed a long-term iron ore supply agreement with South Korean steelmaker Hyundai Steel Co. (004020.SE) for an eight year period covering 22 million metric tons.

The contract is to take effect this year.

As for the contract value, Hyundai Steel said,"South Korean and Japanese steelmakers have usually followed the benchmark prices of the year."

Eom Jin-seok, a steel analyst at Kyobo Securities, said the pricing is likely to be based on the benchmark price agreed between Rio and Nippon Steel in May.

On May 26, Rio Tinto Ltd. struck a deal with Nippon Steel Corp. for a 33% to 44% drop in iron ore term prices for the 2009-10 contract year that started April 1.

Hyundai is the world's second largest electric arc furnace steelmaker, and is building an integrated steel works at Dangjin with annual capacity of 8 million tons of crude steel.

It will operate the blast furnace from January 2010.

Hyundai Steel now has secured a total of 13.6 million tons of iron ore, enough to operate the integrated steel works, Y C Woo, president of Hyundai Steel, said in a joint statement with BHP.

"I am very pleased that we continue to strengthen our relationship with Hyundai Steel following the long term coking coal supply contract last year. Although all commercial terms of the contract remain confidential as per the contractual agreement, we are pleased to see that the contract satisfies each company's interest," said Tom Schutte, president of marketing of BHP Billiton.

-By Kyong-Ae Choi and Elisabeth Behrmann, Dow Jones Newswires; 822-2198-2236; kyong-ae.choi@dowjones.com