(Adds association's comment on iron ore trade and backgrounds)
BEIJING -(Dow Jones)- The China Iron and Steel Association said Friday it opposed the use of an iron ore index to determine prices for term contracts.
"It is inappropriate and unfair and does no good to long-term cooperation between the buyers and sellers," it said in a faxed statement to Dow Jones Newswires.
Australian miner BHP Billiton Ltd. (NYSE:BHP) (BHP) is still talking with Chinese steel mills, led by Baosteel Group Corp., to fix prices for selling iron on an annual contract for the year beginning April 1, 2008.
Analysts said the association's comments indicate that BHP is seeking to link term prices with spot prices.
BHP Billiton CEO
Iron ore index is based on the spot market, which is usually higher than the annual contract price.
The association also said the deal settled between Baosteel and Rio Tinto PLC (NYSE:RTP) (RTP) Monday "should be affirmed, and help maintain the existing international iron ore price negotiation mechanism."
Rio Tinto secured a 96.5% increase prices of iron ore for shipment under the annual contract to Baosteel.
The rate is higher than the 65% to 71% price rise agreed between Baosteel and Brazilian miner, Companhia Vale do Rio Doce (NYSE:RIO) (RIO), announced in February.
The association said international iron ore trade needs to consider the interests of both sellers and buyers, in the short-term and the long-term.
The association also asked local mills to import iron ore based on their actual demands and warned of potential losses if they continued to import more than that is needed.
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(END) Dow Jones Newswires 06-27-08 0613 Copyright (c) 2008 Dow Jones & Company, Inc.