Rio Tinto, the world's second-biggest miner of iron ore, acknowledged publicly for the first time that price negotiations with Chinese steel mills had ceased, underlining suppliers' dwindling support for a system that is cracking apart.

Sam Walsh, head of Rio's iron ore division, said that Rio was no longer negotiating with China's steelmakers – the world's biggest – to agree a benchmark iron ore price for the contract year that began in April 2009.

That should not affect Rio's iron ore sales to China, the driver of its revenues this year. The company is selling ore to China's top mills on a “provisional” contract price, even as it sells more iron ore on the developing spot market.

But Mr Walsh's comments were another indication that the old pricing system is giving way to new methods through which Rio, BHP Billiton, and Vale – the three companies that dominate the seaborne iron ore trade – make money from the metal.

His comments, which did not surprise industry insiders, come five months after the traditional price-negotiaton deadline passed.

They also follow the detention of Rio's lead iron ore salesman in China two months ago. In August, Stern Hu, in charge of price negotiations, was arrested on allegations that he obtained “trade secrets” from China's steelmakers that informed his push for a 33 per cent discount on the prior year, not the 45 per cent discount supported by China's steel industry body.

The benchmark system is not dead, however.

Rio and competitors are selling iron ore to Japanese and South Korean steelmakers at $60 per tonne – a figure that would usually be accepted by global steelmakers as a benchmark price.

But it is becoming an obsolete method of discovering the price of iron ore. Rio sold half of its iron ore production on the spot market in the six months to June 30.

BHP sells ore through a hybrid system based on indices and spot prices.