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http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSSEO9733020090708

BEIJING, July 8 (Reuters) - China's steel mills have agreed to a 33 percent cut in iron ore prices after failing to win a bigger reduction than their Asian rivals, but only for a six-month period rather than a full year, the Chinese Business News said on Wednesday, citing informed sources it did not name.

The deal, which could not be immediately confirmed, would conclude some nine months of tense negotiations that threatened to scupper the decades-old annual pricing ritual, and which took an unexpected turn this week when four Rio Tinto employees in Shanghai were detained by Chinese authorities. [ID:nSYD436642]

Several Chinese steel officials contacted by Reuters on Wednesday said they were unaware of any settlement, but two sources not directly involved in the discussions said they had had heard of a possible agreement, but could not confirm it.

"All news should be subject to the statement from CISA and Baosteel. I have nothing to say about the news," Chen Xianwen, head of the market research department at the China Iron and Steel Association industry body, told Reuters.

The Shanghai-based business newspaper, backed by a local government agency, said China had agreed to pay $0.97 per dry metric tonne unit for Pilbara blend fines and $1.12 per dmtu for Plibara Blend lump, but only for April through October. It said negotiations were already underway for the following period.

But the newspaper said its sources could not say which of the big iron ore suppliers had signed the deal.

A 33 percent cut would be in line with what analysts have been expecting as Rio Tinto (RIO.AX) (RIO.L) showed no inclination to let up its "take it or leave it" stance on the initial deal, and an economic recovery lifted spot market prices above new contract levels, leaving China with little leverage.

If confirmed, it would mean China's steel sector had conceded to the same price that Japanese and South Korean rivals accepted from Rio and BHP Billiton, but for only half the time, giving China's mills the chance to argue for cheaper rates if a tentative economic recovery that has revived steel prices falters.

China, the world's biggest steel producer and buyer of more than half of all traded iron ore, had initially sought a bigger price cut of up to 45 percent versus 2008, but last week softened those demands after the June 30 deadline for agreeing terms lapsed, giving miners the right to suspend term deals.

An agreement would provide more certainty for mills' costs and miners' earnings, but is a setback in China's effort to play a bigger and more influential role in commodity markets; this suffered another blow last month when Rio scrapped a $19.5 billion deal with Chinese state-owned metals group Chinalco.

With a mechanism to review prices more frequently, the vast 800 million tonne a year trade in iron ore moves a small step toward becoming a more liquid commodity market, which would give miners more opportunity to profit from rising prices and open up trading and hedging opportunities for global banks. (Reporting by Tom Miles, Alfred Cang, David Stanway and Miyoung Kim)