Australia doubts China to scrap iron ore contracts

SYDNEY (Reuters) - Chinese steel-makers are unlikely to drop their current long-term contracts with Australian iron ore producers and move to the spot market instead, Australian Finance Minister Lindsay Tanner said on Monday.

The contract system, which traditionally governs Australia's $14 billion (8.7 billion pounds) in annual iron ore exports to China, faces an uncertain future, with Chinese steel mills unable to agree contract pricing this year with major iron ore miners.

Anglo-Australian firms Rio Tinto and BHP Billiton are the world's second-largest and third-largest producers of iron ore respectively. Iron ore is Australia's second-largest export behind coal.

"I think that's an unlikely scenario because the important thing for countries like China to have is reliability of supply, consistency of supply. Therefore I think it's unlikely that you would see the contractual patterns that we have seen in the past disappear," Tanner said.

(Reporting by Mark Bendeich)