CHINESE steel mills face an increase of as much as 100 percent in iron ore term prices for 2010, a top industry official said yesterday.

Brazilian miner Vale first asked for a 90 percent price rise from a year ago before raising it to 100 percent, Luo Bingsheng, vice chairman of China Iron and Steel Association, said at an industry conference, confirming earlier reports that Australian miners Rio Tinto and BHP Billiton reportedly suggested a 40 percent jump. The annual iron ore negotiations are due to conclude on April 1.

A hefty 40 percent jump would see Australian ore prices return to near the pre-financial crisis record in 2008.

Last year, Chinese mills had to accept a price reduction of 33 percent after China's demand for a larger cut was rejected by Rio Tinto, BHP Billiton and Vale.

"The rising costs will further erode the profits of Chinese mills as China depends highly on imported iron ore," said Wang Huachun, a Rising Securities Co analyst.

Iron ore is a key component in the manufacturing of steel. China imported 628 million tons of iron ore in 2009, up 41.5 percent from a year ago and accounting for nearly 70 percent of the country's total consumption.

Sixty-eight big and medium-sized steel makers in China saw their combined profit dive 31.4 percent from a year earlier to 55.4 billion yuan (US$8.1 billion) in 2009, CISA said.

A 90 percent surge in the iron ore prices will hit Chinese steel mills sharply, Zhu Hongren, a spokesman for the Ministry of Industry and Information Technology, said on Thursday.

Analysts forecast China's iron ore imports to reach a record high this year as steel production is still rising despite a supply glut. The MIIT estimated crude steel output to likely rise by 10 percent this year.

"As the demand for steel is on track to recover, it is very likely steel mills will pass their costs to consumers, pushing up steel prices," Wang said.

Yao Jian, a Ministry of Commerce spokesman, said on Tuesday that his ministry and MIIT will provide support for the term ore negotiations, but he didn't elaborate.