Rio Tinto PLC, the world's second-largest iron ore producer, has agreed on a price cut of about 33 to 44 per cent for its iron ore with most of its big steel-making customers in Asia, including South Korea's POSCO, and Taiwan's China Steel and Dragon Steel Corporations.

Last week, the company had reached the same terms with Japan's Nippon Steel Corp.

But Chinese steel-makers, the largest consumers in the world, are calling for a bigger reduction in price, saying they will make losses at the price Rio is proposing.

"Each year the pricing negotiations are tough, and this year is no exception, although the situation is becoming clearer as more customers settle to the same terms," Rio Tinto's iron-ore chief executive, Sam Walsh, said in a statement on Monday.

"We continue to negotiate with our remaining customers, the bulk of whom are in China," Walsh said.

Chinese news agency Xinhua reported that industry industry group, The China Iron and Steel Association (CISA), earlier said that it would not agree to the same terms as it would increase the losses of Chinese steelmakers.

CISA in a statement on its website said that ''the price cut failed to reflect the real supply and demand situation on the international market and would lead to overall losses for Chinese steel companies.''

CISA said that "This does not represent the mutually beneficial relationship between steel producers and iron ore suppliers.''

CISA has insisted that the iron ore price should fall back to 2007 levels, which meant a price cut of more than 40 per cent in the annual contracts of iron ore.

 However, analysts expect some Chinese manufacturers to opt for the same terms, while some others may go for the open spot rates. A shift to spot market is seen risky that may end up paying a higher price.

"We believe the settlements achieved to date demonstrate that customers appreciate the certainty of price and volume that the benchmark system ensures," Walsh said.

Rio Tinto said it has agreed to prices of 97 U.S. cents per dry metric tonne for Pilbara and Yandicoogina iron-ore fines, a type of low-grade ore, down sharply from $1.446 last year, and $1.12 a tonne for high-grade lump iron ore, down from $2.0169.

Meanwhile, Brazil's Vale Sa, the world's biggest iron ore exporter, is reported to have extended a 27 per cent cut in prices, much lower than Rio's benchmark agreement.

Vale, Rio and the third-largest BHP, account for 12 per cent, 29 per cent and 31 per cent, respectively, of quality iron ore.

BHP last month said that it will not sign any new iron ore buyers on long-term prices that were set annually.

Prices of iron ore had quadrupled during the four years until 2008, largely driven by China's hunger for materials to build infrastructure.

Rio's benchmark deals will not have much impact on Sesa Goa, the iron ore unit of Indian mining group Vedanta, since it has moved in recent years to selling nearly all of its output on the spot market, analysts said.