Chinese steel mills have decided to continue negotiations over the price of iron ore with major foreign miners, the China Iron and Steel Association (ISA) said Tuesday to the denial of reports that Chinese steelmakers will accept a 19-percent rise in contract prices.

"We will continue price talks with miners in June," a reliable source with the ISA who declined to be named told Xinhua.

"We do not accept the price increase," he noted.

Chinese steel mills made the decision at a recent national meeting after the world's leading iron ore provider, Brazil's Companhia Vale do Rio Doc (CVRD), and German steel producer ThyssenKrupp AG agreed May 16 on the 19-percent increase in contract prices of iron ore.

Chinese steel mills are resolved to continue talks although some of their foreign counterparts have agreed to the price hike, the source said.

They rejected to reply to confirm letters on the price rise by the CVRD, citing that "the talks over price is not concluded yet," he said.

They hope to secure a lower price rise after being forced to accept a 71.5 percent hike in the iron ore price last year, he said.

So far, Chinese steel mills have not reached an agreement with the world's three largest iron ore suppliers, including Anglo-Australian miner BHP Billiton, Australia's Rio Tinto Group and Brazil's CVRD.

The ISA said earlier that setting the iron ore price without considering the market of China, the world's biggest buyer of iron ore, is unacceptable.

It said that the Chinese central government has worked out a set of policies aiming to regroup the iron and steel industry and phase out out-dated production capacity in order to upgrade the industry's centralization, which will surely dampen China's demand on imported iron ore.

China has always hoped to achieve win-win in iron ore price talks, based on the principle of equality and mutual benefit and the international market supply and demand situation, it said.

Chinese steel firms imported 275 million tons of iron ore last year, or about 43 percent of the global marine trade volume of iron ore and 70 percent of the Asia's total imports.

China is estimated to import about 301 million tons of iron ore in 2006, an increase of 10 percent from 2005, the ISA predicated early this month.

Currently, the European market reports the highest price for steel, the official said.

By the end of April, the composite steel price index on the global market rose to 149 points, close to last year's highest 153.4 points. However, the composite steel price index on the Chinese market only reported 105.67 points at the end of April, down 23.6 percent from March's highest 138.33 points.

"Under such circumstances when the Asian market, especially the Chinese market, is at a low price level, Chinese steel firms would not accept a decision made without taking into account the Chinese market," the ISA said.

The price accepted by the German company would not be taken as the global benchmark as European mills are represented by Arcelor in negotiations for long-term prices, the ISA said.

Major iron ore miners sign long-term supply contracts with major steel companies and the price is set through negotiation every year. Arcelor, representing the European steel companies, and Japan's Nippon Steel and China's Baosteel hold talks with the world's three largest iron ore suppliers.

The price would be adopted as a benchmark price for all iron ore products in the year if any of the three sets of partners reach agreement.

The CVRD bypassed the three major steelmaker negotiators to reach an agreement with German steel producer ThyssenKrupp AG, the ISA said.

The Shanghai-based Baosteel, China's leading steelmaker, has decided to raise the prices of its key products by six to eight percent in the third quarter.

Source: Xinhua