Iron ore price talks between Rio Tinto Ltd/Plc (RIO.L: Quote) (RIO.AX: Quote) and Chinese steel mills were continuing and had not been interrupted, a Rio spokesman said on Friday, denying a Chinese media report that Rio had walked away.

Rio, the world's second largest iron ore producer, and two other big firms, Brazil's Vale (VALE5.SA: Quote) and BHP Billiton (BHP.AX: Quote) (BLT.L: Quote), typically set benchmark prices with big Asian and European steel mills that are then adopted by mills and miners worldwide.

I can assure you the negotiations are continuing, the spokesman, Gervase Greene, told Reuters.

Chinese magazine Caijing on Friday quoted Rio's China Managing Director Anthony Loo as saying: We want to wait for a while to monitor the market situation. We hope conditions will be more normal after a few months, allowing for better negotiation with our Chinese customers.

Greene said he had not seen the Caijing article and would not comment on it.

Rio, the world's second largest iron ore producer behind Vale (RIO.N: Quote), is forecasting output close to 200 million tonnes this year.

Analysts have suggested miners face price reductions of up to 60 percent due a sharp drop in demand for steel that has left many mills running well below full capacity and miners at risk of over-producing.

The negotiations to establish benchmark iron ore prices normally end before April 1.

In this year's talks, steel mills were looking to change the annual talks to quarterly ones, according to Craig James, chief economist for Commonwealth Securities in Australia.

Last week Rio Tinto, the world's third-biggest producer of iron ore, agreed to a $19.5 billion investment by Chinese metals conglomerate Chinalco, the top shareholder in the Anglo-Australian miner, raising some concerns it could influence price setting for ore.

Chinalco's investment would leave it with a 15 percent interest in Rio's Hamersley iron ore mines in Australia, among the world's largest. (Editing by Clarence Fernandez)

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