Bloomberg reported that Chinese steel mills will demand a bigger cut in prices from BHP Billions Ltd and Rio Tinto Group than from Brazil"s Cia Vale do Rio Doce after shipping costs plunged.

Mr Shan Shanghua secretary general of the China Iron and Steel Association said "There is no equalization if Australian and Brazilian ores get the same cuts. That is unacceptable."

Mr Shan said "The entire iron ore market is turning around this year. China and global steel output will fall this year. Chinese steelmakers are also negotiating a change to the format of the price talks. Steelmakers want to negotiate every six months rather than on an annual basis, he said. Mining companies agree in principle to more frequent price setting, though no accord has been reached.”

Mr Shan said China"s steel output, which rose 1.1% to 500.5 million tonnes last year, may fall this year because of slowing global demand. The nation exported 54% less steel products in January from a year earlier.

BHP and Rio almost doubled prices for their ore from Australia last year, exceeding the 71% gain Vale won because it was cheaper to ship the material to China from Australia than from Brazil.