Trade Minister Simon Crean gave assurances Australia would also keep away from the fraught process in which steelmakers aim to strike annual contracts with Anglo-Australian firms BHP Billiton and Rio Tinto, and Brazil's Vale.

"We won't be getting involved. I've made the point to China and I repeat the point, we recognise China's market economy status," Crean told reporters in Canberra.

"All we ask in return is that it act in accordance with market principles, not seek to get government involved."

Crean's comments follow a report that more than 10 top Chinese steel mills had asked Premier Wen Jiabao to make the iron ore benchmark price talks "a matter of national importance".

Steel industry leaders warned the government they cannot agree to the 90 percent price hikes demanded by the miners and that such a rise could hurt national interests, the China Securities Journal reported Saturday.

"The domestic steel companies can no longer bear such high quotes of iron ore and have been forced to hike steel prices to pass on the costs," an unnamed source told the publication.

"Escalating the solution of the iron ore imports issue to the national level can avoid internal friction and protect the overall interest of China's steel industry," it added.

Crean said this year's iron ore negotiations were "always going to be robust" given the strong demand for the key ingredient used in auto production, ship building and other industries, but government intervention would not help.

He said while the issue of intervention had previously been raised by the Chinese, "in the recent visits I have been there, it doesn't get raised".

"The truth is, market principles say when there's more demand than there is supply that will have an impact on price," Crean added.

Pressure is on China's steelmakers to strike a deal in this year's annual price talks after they failed to reach an agreement with BHP, Rio and Vale for the first time in decades in 2009.

China, the world's largest iron ore consumer, has now ended up paying more than its Asian neighbours because it must buy on the spot market.

Last year's talks were also complicated by the arrest in July in Shanghai of four Rio Tinto executives, including Australian passport holder Stern Hu, who are due to face trial on industrial espionage and bribery charges.

Just weeks prior to the arrests, a 19.5 billion US dollar bid by China's state-owned metals giant Chinalco for Rio Tinto failed, raising speculation the events were linked.

Crean on Monday welcomed a report to China's State Council, seen by an Australian newspaper, which found that the Chinalco deal failed due to market forces rather than political problems.

"I think that's an important concession if it's true," Crean said.

"We welcome that, and hope that not only was it a learning process but it provides the basis for moving forward with our relationship with China on a more solid footing."

earlier related report
Rio, Chinalco in talks on 12 bln dlr Guinea mine: report
Sydney (AFP) March 16, 2010 - Anglo-Australian miner Rio Tinto is in talks with China's Chinalco on jointly developing the Simandou iron-ore field in the West African nation of Guinea, the Sydney Morning Herald reported Tuesday.

Negotiations on developing the 12 billion US dollar (8.75 billion euro) mine had been taking place in Beijing and were at an advanced stage, the newspaper said on its Internet edition, without naming its sources.

Rio Tinto is keen to get its relations with China back on track following its snubbing last year of a near 20-billion-dollar cash injection from state-run Chinalco, which would have given China an important presence in Australia's vast resources sector.

Rio's relations with China, its main market, have also been strained by the arrest of four of its employees who were detained last July during fractious iron ore contract talks between China and the miner.

If the governments of China and Guinea approve the deal, it was likely Chinalco would pay for its Simandou interest by financing the next stage of pre-development, the newspaper said.

The two were also in talks on iron ore exploration in China, bauxite and alumina refining in Australia and Rio's Oyu Tolgoi copper and gold project in Mongolia, it said.

Rio Tinto chief executive Tom Albanese is due to attend the China Development Forum in Beijing this weekend.

"An objective for 2010, and one that I am particularly focused on, is to strengthen our relationship with China," Albanese said in the company's annual report.

"China is our largest source of short term demand growth. In 2009, it became the most important destination for our products and influences global pricing of most metals."

Despite walking away from the Chinalco deal, Rio has said it is interested in developing its relationship with its largest shareholder.

"We will continue to work towards extending our relationship with Chinalco and to pursue business opportunities that may be to our mutual benefit," Rio chairman Jan du Plessis said in the annual report.

Rio Tinto, the world's third largest mining company, is increasingly looking to China for growth because of booming Chinese demand for raw materials.

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