Chinese steel industry officials late Tuesday said they won't go back on their demand for a minimum 40% cut in 2009-10 iron ore term prices despite Anglo-Australian miner Rio Tinto Plc (RTP) reaching a deal with Japan's Nippon Steel Corp. (5401.TO).

"The prices reached by Japan steel makers and Rio are unacceptable as they are higher than current spot ore prices in China and are to the disadvantage of long-term contract (users)," said Tian Zhiping, vice general manager of Hebei Iron & Steel Group, China's second-largest steel maker by output.

"We hope to complete the talks by the end of June, and that should be based on both parties' sincerity," he said.

In a statement Tuesday, Rio Tinto said it has agreed on a price of 97 cents per dry metric ton for Pilbara and Yandicoogina iron ore fines, compared with $1.446 last year, and $1.12 a ton for lump, down from $2.0169 last year.

The deal that saw 2009-10 prices cut between 33% and 44%, threatens to undermine China's demand for deeper cuts and its position as benchmark setter for Asian term prices.

Shan Shanghua, secretary-general of the China Iron and Steel Association, told reporters earlier in the day that CISA was still studying the issue, and had not reached a conclusion on a response to the Rio Tinto-Nippon deal.

Last Thursday, Shan had said the Chinese side would demand a 45% price cut from Rio Tinto and a 40% cut from Brazilian miner Vale.

Meanwhile, Ding Shouhu, chief negotiator for Baosteel Group Corp., said he needed to confirm terms of the Rio-Nippon deal before commenting.

Baoshan Iron & Steel Co. (600019.SH), or Baosteel, is the biggest steel maker in China and has been leading the Chinese side in this year's price negotiations.

The Rio Tinto-Nippon deal is the first this year and could become the benchmark for the other two big miners, BHP Billiton Ltd. (BHP) and Companhia Vale do Rio Doce (RIO), which are continuing negotiations with steel mills.

Industry officials close to negotiations said JFE Steel Corp., a unit of JFE Holdings Inc. (5411.TO)), Sumitomo Metal Industries Ltd. (5405.TO) and Kobe Steel Ltd. (5406.TO) have also accepted the same terms as Nippon, with other Japanese mills expected to follow suit, effectively making this the official Japanese price for the year.

BHP is widely expected to be the next to set terms with Japan. Vale has said it would wait to see the terms secured by Rio Tinto and BHP before concluding its own price talks.

(Chuin-Wei Yap and Juan Chen in Beijing contributed to this report)

-By Yue Li Dow Jones Newswires; 8610 6588 5848; yue.li@dowjones.com