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China is seeking a "China-specific" iron ore benchmark price and won't "blindly" take cues from term prices set by other Asian buyers, China Iron and Steel Association Secretary-General Shan Shanghua said Friday.

Speaking at an association conference that is traditionally seen as a venue to lay the groundwork for next year's iron ore term price talks with global mining majors, Shan said the new benchmark contract could be for a six-month or a one-year term.

China also prefers a contract year that starts Jan. 1, Shan said. Contracts now start from Apr.1, in line with the Japanese fiscal year, a legacy of the times when Japanese steel makers used to lead price negotiations.

"China's iron ore negotiation mechanism is only an idea now, and there is a long way to go in achieving it," Shan said.

The comments mirror similar remarks made by CISA Chairman Deng Qilin earlier this week, in an interview with Dow Jones Newswires, and generally reflect the thinking among Chinese industry officials who are expected to lead 2010 price negotiations on behalf of the vast majority of Chinese steel mills.

CISA, which led negotiations for 2009 prices failed to reach an agreement with key suppliers earlier this year after major miners such as BHP Billiton Ltd. (BHP), Rio Tinto Ltd. (RIO) and Vale S.A (VALE) refused to agree to the deep price cuts demanded by the association.

In the past, the first agreement of the season became the industry benchmark, but that tradition has been gradually breaking down with Rio and BHP successfully holding out for higher prices in 2008 despite Vale reaching a price deal with the Chinese first.

The strains on the benchmark pricing system grew late last year when buyers, including China, opted for more spot deals during the global economic crisis as spot prices fell below long-term contract prices. China's refusal to accept 2009 prices offered to Japanese and South Korean steel mills also accelerated the shift away from uniform pricing across markets and regions.

At the conference Friday, Shan said the country wants "one price per grade" of iron ore from all miners, and wants to stop miners from simultaneously selling iron ore on the benchmark contract and in the spot market.

Major miners such as BHP have said they expect to sell as much as 30% of their annual production in the spot market this year.

 
   Health Of The Market In Focus Ahead Of 2010 Talks 
 

The association has sought to highlight the percieved weaknesses in China's steel industry ahead of 2010 price negotiations.

It presented considerably conservative growth projections for China's steel demand next year to the World Steel Association this week, and during Friday's conference, Chinese officials underlined what they see as a supply overhang in the current market.

Weak steel prices may prompt local steel mills to cut production towards the end of this year, Han Weidong, deputy markets chief for Hebei Iron and Steel Group Co., China's second largest steelmaker, said.

Han said China's steel output and iron ore demand may shrink next year on the back of declining loan growth and government investments.

Meanwhile, iron ore stocks at major Chinese ports have risen to 76 million metric tons at the end of September, Fu Jinxiu, deputy chief for transportation and safety at China's Ministry of Transport, said Friday.

Stocks had hovered around 70 million tons for months, and the increase suggests a trend that threatens steel prices, as they inch closer to a record 89 million tons held at ports in October last year, before steel prices collapsed following the global financial crisis.

Nonetheless, China continues to import vast amounts of iron ore, posting a record 64.6 million-ton influx in September, as traders and mills took advantage of relatively cheap spot prices in August.

At the World Steel Forum in Beijing Monday, China's Industry Minister Li Yizhong said the current 112 licensed iron ore importers were far too many, although he didn't offer details on how the government planned to reduce that number.

But CISA's Deng said China will soon move to regulate import of the commodity. Under new rules, trading houses will not be allowed to import iron ore unless they hold firm orders from local steel companies, he said Monday.

-Juan Chen contributed to this article; Dow Jones Newswires; 8610 6588 5848; juan.chen@dowjones.com