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State-run CISA forged its original demands at the height of the world financial crisis but a recovery in steel prices at home and a rising global spot price for ore has since undermined China's case.

Spot iron ore prices have leapt by a fifth in just a month, to a 4-month high above $80 a tonne delivered in China, equivalent to around $65 free on board. This is higher than the contract price of $61 Japanese and South Korean mills pay.

While some analysts say prices may have peaked for now as domestic production becomes more economical, others warn that an infrastructure-led economic recovery could stoke further gains -- giving mills an even greater incentive to get a deal done.

"By abandoning the benchmark price... Chinese mills run the risk that if the spot price rallies further, they could end up paying higher prices than the rest of the world," Macquarie analysts said on Wednesday in a report.

(Additional reporting by Humeyra Pamuk, David Stanway, Miyoung Kim and Nick Trevethan; Editing by Jonathan Leff and Peter Blackburn)