UPDATE 1-POSCO sees H2 recovery, 33 pct price cut with BHP

*Seeks to cut iron ore prices by 33 pct

*Says second quarter to be "most challenging" (Adds details)

SEOUL, June 9 (Reuters) - South Korea's POSCO (005490.KS), the world's No.4 steelmaker, warned on Tuesday that the current quarter will be most challenging and it was seeking to cut iron ore prices by 33 percent, along with BHP Billiton (BHP.AX) (BLT.L).

"The second quarter will be the most challenging period and we expect the business conditions to improve from the second half of this year," POSCO chief executive Chung Joon-yang told reporters.

Chung also said it was seeking to agree with Australian miner BHP to make the same iron ore price cut with that it agreed with Rio Tinto (RIO.L) (RIO.AX), a move that will make the deal a step closer to being accepted as a benchmark annual price for 2009/10 supplies.

Japanese, South Korean and Taiwanese steel firms recently agreed on a 33 percent price reduction with Rio Tinto, but China has refused to accept it, arguing that a deeper cut was needed as many mills are struggling with mounting losses and tumbling sales.

"Japanese steel firms are leading the talks (with BHP) and we seek to lower prices by the same level to what we've already agreed," Chung said.

POSCO also joined other Asian steelmakers opposing the proposed joint venture between BHP and Rio Tinto to create an iron ore giant controlling around one third of the globally traded iron ore market.

"We don't view the deal positively and other steelmakers also oppose the deal," Chung said.

Japan's steel industry on Tuesday joined an anti-competitive tirade launched by steelmakers around the world against the iron ore joint venture, while China called for a "fully open international market." [ID:nT117189]

The two mining heavyweights, which with Brazil's Vale (VALE.N) (VALE5.SA) account for nearly 70 percent of the world's traded iron ore, face tough anti-trust scrutiny. (Reporting by Miyoung Kim; Editing by Rupert Winchester)