Rio Tinto said on Tuesday it had reached an agreement with Japanese steelmakers for a 33 per cut in iron ore prices for 2009-10 in a deal that could save the benchmark system of annual prices negotiations, but opens the door to a battle with China.

The deal with Nippon Steel, JFE Steel and other smaller Japanese mills comes as the talks between the Chinese steelmakers and the miners Vale of Brazil, Rio and BHP Billiton remain deadlocked beyond the traditional deadline of April 1.