Chinese companies, which normally adhere to the pricing standards determined by their Japanese counterparts, are less likely to tag along this time.

China's steel firms have rejected the 33-per cent cut in iron ore prices agreed between Rio Tinto and Japanese steel maker Nippon Steel Corp, as the annual rate for iron ore.

The China Iron and Steel Association (CISA) yesterday said in a statement on its website that the price cut does not reflect the real supply and demand situation on the international market and would lead to overall losses for Chinese steel companies, the CISA.

Steel makers say that the reduction in iron ore prices is not enough to offset the fall in the selling price of steel products in the global markets.

China, the biggest importer of iron ore, has justified a price cut of 40 per cent on two counts. First, it says, iron ore prices have been raised by nearly 400 per cent in the past five years of the global boom that led to a demand for steel. Second, it says, the demand for steel was unlikely to pick up in the current year due to the prevailing global recession and economic slump

Accordingly Chinese steel makers are looking at a price reduction of 40 per cent or more for iron-ore deliveries this year or revert back to the 2007 levels.

Last week, Rio Tintos subsidiary Hamersley Iron reached an agreement with Japan's Nippon Steel Corporation on the annual contract price for Hamersley iron ore with a 33-per cent cut in the contract price of fine ore and a 44 per cent cut in lump ore. (See: Chinese steelmakers upset with Nippon Steel's ore price-cut deal with Rio)

"This does not represent the mutually-beneficial relationship between steel producers and iron ore suppliers," said the CISA statement.

It added "Chinese steel companies will not accept or follow the price cut."

Chinese steel firms are doing badly as global demand for steel has collapsed. Large and medium sized mills posted a loss of 1.87 billion yuan in April, with the number of money-losing mills increased by four from the first quarter.

According to the CISA deputy vice president Luo Bingsheng, during the first four months the steel industry made a loss of 5.18 billion yuan, 29 of all medium and large mills suffered from losses.

The crude steel consumption was 170.43 million tons, up 11.03 million tons, or 6.92 per cent, year-on-year. As of the end of April, the domestic steel price index stood at 95.56 points, down 50.92 points, or 34.76 per cent, from the same period of last year. The index was the lowest since 1994.

However, a French advisory firm recently projected that the world steel output would rise to 2.2 billion tons in 2015 from 1.3 billion tons last year and China's steel output would account for 48 per cent of the world totals.