The shifting of a 40-year-old system of setting annual iron ore prices to a short-term pricing mechanism may shake up the Chinese steel industry by creating an even playing field for all steel mills - large and small - in terms of raw material costs.

BHP Billiton said on Tuesday that it had concluded agreements with a significant number of Asian customers to shift pricing for the majority of its iron ore to short-term contracts, which are based on market prices.

Vale wants a new pricing system every quarter, said Pedro Gutemberg, director of marketing and research at Vale in Beijing on Tuesday, speaking at an industry conference

"A more time-adjusted pricing mechanism is needed in order to better reflect real market prices," he said. "Benchmark prices are over. This is a market-oriented industry."

That shift may be of some value to smaller steel mills.

"Vale has offered quarterly priced iron ore to us, which means we could buy iron ore at the same prices that large steel mills pay," said a sales manager at a small, private steel mill that doesn't have an iron ore import license.