CHINA could stop using Vale's iron ore if the Brazilian miner insists on a price rise, industry officials, who forecast a slowdown in steel demand this year, said yesterday.

Domestic mills met last week to discuss measures to stop using Brazilian ore, Luo Bingsheng, vice chairman of the China Iron and Steel Association, said at a conference in Beijing.

China plans to boost domestic ore output, cut steel product exports, and may upgrade some blast furnaces which now rely on Brazilian ore. Luo said China may tighten policies on steel exports further, adding that sharp increases in exports over the past two months were atypical.

Vale is seeking to raise its already-settled contract ore prices this year for Asian miners from this month to match what European customers are paying.

The industry group last week sent a letter of complaint to Vale telling it to immediately stop the unreasonable demand.

Vale granted Asia mills discounts in the past to make up for higher shipping costs across the Pacific.

Chinese industry officials said Vale has slowed loading ore bound for Asia, causing losses for steel makers. But Luo said high-level ore inventories at domestic ports could help ease the pain.

Market watchers have said it's unusual timing for Vale's request, given the softening ore market. They said Vale may be trying to position itself in the new round of price negotiations that will start soon.

Xu Lejiang, chairman of Baosteel Group Corp, said at the same conference that China's steel output may be below 500 million tons this year, due to weak demand amid a global economic slowdown.

The steel industry association had earlier in the year forecast 540 million tons. China's steel mills have reduced production in response to support prices amid weak demand and higher costs.