CHINA won't necessarily follow iron ore contract price agreements set by steel mills in other nations, a senior industry official said, as it fired the first salvo in the upcoming annual negotiations for the 2010-2011 fiscal year.

Contracts for China should start from January 1, China Iron and Steel Association Secretary General Shan Shanghua said at a conference in Qingdao yesterday. Contracts now start from April 1, based on Japan's fiscal year.

"We will not insist on other countries taking China's iron ore price as a reference, and we will also not blindly accept prices agreed to by other countries," Shan said. His remarks are not new because China has not formally settled a contract price with iron ore majors for 2009-2010, but "China's intentions are important" as it's the biggest buyer of the steel making ingredient, investment bank UBS noted.

Graeme Rowley, executive director of Fortescue Metals Group Ltd, told Bloomberg News yesterday that "the Chinese are definitely large enough as purchasers and as customers to be very dominant in price setting" and "a January 1 price date is eminently sensible."

The association, which represents China in price talks for the first time for the current fiscal year, had demanded but failed to secure deeper price cut than the 33-percent reduction offered to other Asian mills by ore giants Rio Tinto and BHP Billiton.

UBS forecast a rise of 20 percent in benchmark prices for 2010-2011, an outcome that's still a 20 percent discount to the record 2008-2009 prices, citing China's stable steel production despite weakening steel prices, its record-level imports and the recovering demand in traditional markets.

Negotiations formally begin at the end of October.

Shan also said China will have a bigger say in iron ore pricing when its stakes in overseas mines rise in two to three years and ore output climbs.