By Samantha Pearson in S?o Paulo

Vale, the world?s biggest miner of iron ore, became the latest company in the industry to publicly bow to pressure from steelmakers over the cost of the raw material, opening itself up to a more flexible pricing system.

The majority of iron ore contracts are based on average prices for the quarter, but as commodity markets have slumped amid the fresh global crisis, steelmakers have called on mining companies to lower the cost of the raw material.

Vale is open to discussions of ?different terms? of payment, Murilo Ferreira, the Brazilian company?s chief executive, told reporters on Tuesday. However, he added that the company had no plans to abandon the quarterly pricing system that miners adopted last year.

Falling benchmark iron ore prices, which hit a fresh low for the year on Tuesday of $150 a tonne, have also put pressure on Vale?s competitors to bring down their prices in line with the lower values on the spot market.

One option for miners would be to offer customers prices based on monthly averages rather than quarterly averages. ?Major miners have agreed a revised basis for Q4 prices in iron ore contracts,? said a senior iron ore trader.

As countries across the world have revised down their growth forecasts, demand for the steelmaking ingredient has slumped, knocking down iron ore prices about 16 per cent over the past month alone.

If prices continue to fall, industry executives expect more companies could move to offer monthly pricing systems. Currently, about 60 per cent of contracts are based on quarterly prices.

Last May, Wolfgang Eder, chief executive of Voestalpine, the Austrian steelmaker, told the Financial Times that miners would start to lose the upper hand in contract negotiations in 18 months. ?It?s never that one party is only strong and the other is only weak,? he said.

Vale?s shares led declines on Brazil?s stock market on Tuesday as investors tried to factor in the effect of a different pricing system on the company?s bottom line.

However, some analysts remained sceptical about the extent to which Vale would budge over its prices in the near-term.

?It seems more to be a power play with the Chinese,? said Pedro Galdi, an analyst at SLW Corretora in S?o Paulo.

? The Financial Times Limited 2011