Brazilian mining giant Vale SA (VALE) may finally be able to celebrate the end of delicate, often trying, iron ore price talks two or three weeks from now.

The "intensive" last stage of price talks between mining companies and the key Chinese steel mills that set the traditional benchmark is under way, according to mining analyst Cristiane Viana of Rio de Janeiro brokerage Agora Senior. Contract negotiations, undertaken in recent years between Vale and the Chinese, have now gone beyond the previous most-delayed settlement date of May 29, in 2002.

Vale has said it would only agree to a price once Australian rivals Rio Tinto (RTP) and BHP Billiton (BHP) have settled. China is believed to be demanding at least a 40% cut from the 2008 contract price. Contracts cover the year beginning April 1.

Two recent bank analyst reports, by Goldman Sachs and JPMorgan, said Vale would likely eventually settle for a 27% cut.

JPMorgan's estimated cut in term prices is based on its belief that Vale will receive compensation for not having as high a settlement in China as Australian miners managed last year. Goldman Sachs pointed out that Vale's price cut would be less than that of Australian miners because of its superior iron ore quality.

But mining companies have been in no hurry to settle, as time may be on their side. Major economies such as Brazil and China are showing signs of emerging from the economic downturn, and, consequently, demand is likely to push prices higher.

For the same reason, China is keen to settle as soon as possible, and some analysts suspect it is stockpiling ore in order to pressure benchmark negotiations.

Brazilian Ministry of Industry and Trade statistics showed iron ore shipments in May dropped for the first time since January. May iron ore exports declined to 15.3 million metric tons, down 35% from April and 56% from a year ago.

Viana noted that China bought iron ore in April at a much greater rate than its steel production, which could indicate stockpiling.

JPMorgan believes the mining industry is in a period of transition toward new price mechanisms. The delay in 2009 benchmark settlements is viewed as presaging the demise of the system and the greater use of spot sales. The bank said the spot market and benchmark systems would coexist in the future, until the latter loses importance. An increasing portion of iron ore is being sold at spot while the benchmark is in its current limbo.

At the end of May, Vale admitted for the first time it was selling iron ore on the spot market, guided by client preference. "If clients want to use the benchmark system, that's great; if they want to use the spot market, then that's great, too," Vale Chief Executive Roger Agnelli said earlier this year.

Agnelli has always preferred the benchmark system, arguing it is predictable, gives reliable supplies and allows clients control over their costs.

Vale has also said it has been giving Chinese mills a provisional discount of 20% on 2008 prices, which would be quitted and backdated to April 1 once the benchmark was set.

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