UPDATE 1-Global iron ore price cut seen impacting N.America

* Benchmark ore cut pressuring Cliffs to lower prices

* Cuts come as steel prices starting to rise (Adds more Cliffs comment; updates stock prices)

By Steve James

NEW YORK, May 26 (Reuters) - U.S. iron ore pellet producer Cliffs Natural Resources (CLF.N) might have to drop prices following a settlement by mining leader Rio Tinto to cut its iron ore price by 33 percent for some Asian steelmakers, analysts said on Tuesday.

But they saw little immediate impact on steel prices which have already started to rise again after a bleak nine-month period in which demand fell away in the economic downturn.

In any case, most integrated American steelmakers have their own sources of iron ore -- a key raw material for steel -- while about half the producers make steel from scrap instead, they noted.

"Cliffs will have to lower prices," said Michael Locker, of steel industry consultant Locker Associates.

Charles Bradford, of Affiliated Research Group, said AK Steel (AKS.N) was the biggest manufacturer that relied on outside ore purchases. "AK is naked (exposed) when it comes to iron ore.

"They have a contract with Cliffs, which is more than the world price," he said following the news that No. 2 iron ore producer Rio Tinto (RIO.L) (RIO.AX) agreed to cut iron ore prices to Japanese steelmakers by a third in this year's first contract settlement, which traditionally sets the benchmark for other contracts.

Christine Dresch, a spokeswoman for Cleveland-based Cliffs, the largest North American producer of iron ore pellets, said there was a system of "provisional pricing" for Chinese customers until the benchmark was set.

"Following today's settlement, we will continue talking with our customers," she told Reuters.

Another spokesman, Steve Blaisden, later explained that, for North American customers, Cliffs had a formula-based pricing system, which took into account three factors -- the pellet price, current steel pricing and the company's costs.

Traditionally, the first deal reached by a major ore supplier becomes the benchmark price in a decades-old system of setting iron ore prices on the basis of annual negotiations, a process now under threat from growing spot market trade.

Since 2002, the iron ore price has quadrupled as economic growth led a boom in demand for steel. But in the current economic downturn, that demand has dwindled and iron ore producers had been widely predicted to cut prices. Some analysts expect Chinese firms to balk at the new benchmark and demand even bigger price cuts.

Last month, Cliffs reported a first-quarter loss and said iron ore pellet sales volume slumped 27 percent to 2.0 million tons, and revenue per ton was down 2 percent at $76.50.

The shares of integrated U.S. steelmakers rose on Tuesday after the announcement. AK Steel closed up 65 cents, or 5 percent, at $13.42 on the New York Stock Exchange. U.S. Steel Corp (X.N) rose 4.2 percent to $30.73 and ArcelorMittal (MT.N) ended the day 4.9 percent higher at $30.41. Cliffs rose 6 percent to $24.55.