Brazilian mining mammoth Vale S.A. (VALE) looks set to gain a more favorable 2009 iron ore term price from China than previously expected after settling with global steelmaker ArcelorMittal (MT) Friday.

"With each contract signing with mature and consolidated markets, the pressure on China to settle is growing," said Gilberto Cardoso, mining analyst at Banif Investment Banking.

ArcelorMittal settled an annual ore price supply contract with Vale at the same price level recently agreed by South Korean and several Japanese steelmakers.

All have agreed to pay for iron ore fines at 28.2% below the 2008 reference price, with lump iron ore prices sliding 44.47%, Vale said.

China has been holding out for a cut of at least 40%, but market consensus is that it will be hard-pressed to gain such a reduction, especially after these major settlements.

Cardoso roughly estimated the major Chinese mills, yet to agree 2009 term prices, as around 33% to 35% of Vale's market.

Major Chinese steelmakers' bargaining position appeared to diminish even further Monday on Chinese press reports that some mills in the north of the country may have also settled 2009 term prices.

The mills in Shanxi province are reported to have agreed contracts with the world's three largest suppliers: Vale, BHP Billiton Ltd. (BHP) and Rio Tinto Ltd. (RIO).

If confirmed, the mills will have broken ranks with China's umbrella negotiating organization, China Iron and Steel Association, or CISA.

Meanwhile, there is no clear end in sight for the formal Chinese mill negotiations via CISA.

"People had expected a deal by the end of June, but it looks like it may take some time longer," Cardoso said.

"If there's no agreement with the Chinese by the end of June, then there won't be one," said Marcos Asuncao, mining analyst at Brazil's Banco Itau.

Asuncao indicated that the Chinese would then buy their iron ore on the spot market instead of using a fixed annual contract.

"The Chinese are not interested in either the spot or benchmark price. What they want is the lowest possible price. Last year when the spot market price was higher, they favored the benchmark; this year, when the spot's lower, they want the benchmark," he explained.

In recent years, Vale as the world's largest supplier and Chinese mills as the world's largest consumer have set the global term price for iron ore through annual negotiations.

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