Brazilian mining mammoth Vale S.A.(VALE) is likely to settle its annual iron-ore term contract at around 27% below last year's price, the Estado news agency reported Tuesday.

The expected settlement amount is based on analyst reports from Goldman Sachs and JPMorgan.

The reports follow Rio Tinto's (RTP) agreement to cut ore prices to Japan's Nippon Steel (NISTY) by between 33% and 44% for the year starting April 1.

Contacted by Dow Jones Newswires, Vale executives would not comment on the Rio Tinto settlement.

JPMorgan's estimate of a 27% cut in Vale term prices is based on its belief Vale will receive compensation for not having as high a settlement in China as Australian miners managed last year.

Vale has stated it will not close any deal with China this year until Australia's Rio Tinto and BHP Billiton (BHP) have settled.

The bank also believes the price managed by Rio Tinto in Japan is favorable for miners given the sharp fall in global steel output.

Goldman Sachs pointed out that Vale's price cut would be less than that of Australian miners because of its superior quality.

There are still doubts as to whether the Rio Tinto Japan price will be adopted as the benchmark for the region.

"Despite today's agreement, the mining industry is, in our view, in a period of transition toward new price mechanisms," said a JPMorgan analyst.

The bank said the spot market and benchmark systems will coexist in future, until the latter loses importance.

Vale has always said it prefers the existing benchmark system, which involves leading suppliers and clients coming together and setting an annual price for the whole market. In recent years, Vale and China have set the benchmark.

JPMorgan expects China will resist settlement at the Rio Tinto and Nippon level. The bank noted that China has been firm in demanding a reduction of between 40% and 45% this year.

However, Goldman Sachs believes China should accept that level of settlement as it is below current local spot prices.

According to the bank, the 27% price cut would put Australian ore deliveries in China at $71.90 a ton, Vale at $80.30 to $86.60 and Chinese local ore at $86.

At 1615 GMT, Vale was trading 1.01% higher at BRL32.97 ($16.28).

Other analysts believe a benchmark may not be set this year and a significant amount of iron ore sales will be on the spot market.

-By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086; john.kolodziejski@dowjones.com