Instead it has been forced to provisionally price its ore to the Asian giant at the same price it charges Japanese, Korean and Taiwanese customers.

Yesterday, a Rio spokesman said the company had agreed on prices with non-Asian steel mills for the June quarter, but would not comment on what was happening with China.

It is understood Rio managed to negotiate a price rise of about 90 per cent for iron ore before freight, in line with price rises secured by BHP Billiton and Vale.

These negotiated prices of around $US110 to $US120 a tonne are based on the average of index prices from January to March.

It is understood Chinese steel mills are paying the same price as competitors in neighbouring countries, but view this as a provisional price, meaning there is the potential for adjustments down the track.

All the big iron ore miners have been selling to China on a provisional basis since the breakdown of acrimonious talks last year.

Officially the matter of a final price remains unresolved, though analysts do not expect it to be revisited.

This year, BHP succeeded in killing annually negotiated pricing in favour of shorter term pricing based on spot or index price movements.

First Vale and then Rio followed BHP down the same route.

BHP has said the majority of its contracts are now priced on a shorter term basis, implying it has signed deals with China.

BHP chief executive Marius Kloppers said the new pricing regime was still evolving.

Most steel mills want to base their prices for the current quarter on the previous quarter, but Mr Kloppers believes this will shift to a price based on the quarter ahead in coming years.

"If you price it on an early quarter price, it is great (for mills) while the steel price is going up because your raw material price is cheap and your profit margins look great," he said.

"If the steel price starts falling and your raw material price is rising, that feels less good."

Pricing on a late-quarter basis would line up better with the steel price received by mills after the iron ore was processed, Mr Kloppers said.

He dismissed concerns recently raised by Macquarie analysts that steel mills could delay taking shipments in a falling price environment to secure a better price.

"You still have some performance risk, but you always have that and the risk is much smaller with a quarter lag than when you price things for a whole year," he said.

Sourced from www.theaustralian.com.au