The iron ore price deal that Brazilian mining giant Vale S.A.(VALE) reached with Japanese and Korean mills Wednesday means big Chinese customers will be hard-pressed to gain the large cuts they want.

"This has significantly reduced China's negotiating powers," said Cristiane Viana, a mining analyst at Rio de Janeiro's Ativa brokerage.

"The two biggest miners have settled and it will now be very difficult for China to get a better deal," she said, referring to Vale and Rio Tinto (RTP), which settled earlier this month with Asian mills.

Industry watchers say negotiations with China are likely to be settled in the next few weeks, especially if Vale has sealed deals with 38 small, privately owned Chinese steel mills for the sale of 50 million metric tons of iron ore this year, as the Beijing News reported Wednesday.

The report didn't specify price levels.

Vale spokesmen would not comment on the Beijing News report, nor on the implications of the latest agreements in the company's talks with the Chinese steel association and heavyweight Baoshan Iron & Steel Co, which want a cut of 40% or more off last year's benchmark.

Earlier Wednesday, Vale agreed to a 28.2% reduction for iron ore fines with South Korea's Posco (005490.SE) and Japanese steelmaker Nippon Steel Corp. (5401.TO) along with other Japanese mills, the miner said. Lump iron ore prices will slide 44.47%, while iron pellet prices, much prized for their efficient use in blast furnaces, will decrease 48.3% from the 2008 contract price.

The fall in 2009 iron ore prices follows a steep drop-off in iron ore demand due to the global economic slowdown.

Vale has been waiting on the sidelines this year, opting to allow rivals BHP Billiton Ltd. (BHP) and Rio Tinto PLC (RTP) to set market prices with China for 2009. Last year, Vale had reached an early deal with Asian steelmakers, only to see those prices topped by ore from Australia when rival miners were able to wrangle a proximity premium.

Analyst Leonardo Alves of Brazilian brokerage Link Corretora said Vale's Wednesday agreement with the Asian mills came in line with market expectations, which had pegged the drop for iron ore fines at 27% to 30%.

"What's important is there were no surprises," Alves said. "After Rio Tinto agreed on a price with Japanese and Korean mills, it became clear Vale would also settle prices at similar levels."

The price cut was the first since 2002, but that year the decline was a mere 1%, a Vale spokesman said.

Last year, Vale won 65% to 71% rises in benchmark prices for the various iron ore grades.

Analysts noted this year's price cut may not be as dramatic as it seems. "The impact on Vale's bottom line should be neutral and we recommend Vale as a Buy, as the price decision was already factored in," said Viana. After rising earlier in the session, by Wednesday afternoon Vale's New York Stock Exchange-traded shares were off 1% at $19.59.

The price-cut impact on Vale's day-to-day cash flow would "not be very big," Viana said.

Viana pointed out that much of Vale's recent ore sales already carried a 20% discount. Since April 1, Vale has been giving Chinese mills a 20% provisional discount, which will be adjusted once the benchmark price is set.

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