China Iron and Steel Association (CISA) warned China's steel makers not to accept the index pricing that will be proposed by suppliers in 2009 iron ore negotiations, the Shanghai Securities News reported on Dec 25.

One of the largest iron ore suppliers BHP Billiton recently suggested replacing the current fixed-price contract with an index-based pricing, which adjusts prices on a more regular basis or based on spot market conditions.

Shan Shanghua, secretary general of CISA, was quoted by the newspaper as warning Baosteel, which is leading Chinese steel makers' negotiation with major international iron ore suppliers, not to accept such a pricing scheme and furthermore, that mills would be deprived of import licenses if they do so.

Chinese mills have suffered from skyrocketing prices in iron ore imports in recent years, but the prices are expected to drop in the long-term contract for 2009 as demand decreases.

(China Daily December 25, 2008)