Chinese steel mills are prepared to demand a 40 percent iron ore price cut and the introduction of quarterly pricing as part of their bargaining during benchmark pricing negotiations with Australia's ore miners BHP Billiton and Rio Tinto.
Asian steelmakers are calling for the first cut in annual iron ore prices in an effort to come to terms with the decline in steel prices since the latter part of last year.
The new benchmark prices are due to take effect on April 1; however, Chinese steelmaker Baosteel is apparently seeking to institute the quarterly system from this month.
Brazil's Vale and Australia's Rio Tinto, the world's top iron ore miners, have cut production by 10 percent since November due to lack of demand. BHP Billiton has not announced any production cuts, but it has been selling a large amount of its iron ore on the spot market at prices well below the benchmark price.