WRAPUP 3-China gives ground to save iron ore deals; miners mum

* China ready to give ground on its price cut demand-source

* New stance could salvage fixed-price benchmarking system

* Rio, BHP offer no comment after compromise

(Adds ThyssenKrupp comments)

By Alfred Cang and James Regan

SHANGHAI/SYDNEY, July 1 (Reuters) - Chinese steel mills offered their first meaningful compromise on iron ore prices on Wednesday, scrambling to salvage annual supply deals with global miners who kept silent one day after a deadline to agree terms.

After holding out all year for a more than 40 percent price cut from last year, the China Iron and Steel Association (CISA) is now prepared to accept a reduction only slightly deeper than the 33 percent cut agreed by other Asian mills, a source familiar with CISA talks told Reuters, confirming media reports.

Citing CISA officials, the industry source, who declined to be identified, told Reuters China was also ready to move to a bi-annual price-setting regime -- offering more upside for miners if prices continue to rally -- if talks end quickly.

But it was far from clear that Rio Tinto (RIO.AX)(RIO.L), which had said it would adhere to the June 30 deadline for extending annual contracts, or BHP Billiton (BHP.AX)(BLT.L) were ready to give up their "take it or leave it" stance, with the positions hardened by a recovery in spot prices.

Rio, which has said it would sell its ore on a spot basis after the deadline to settle prices for the year from April 1, declined to comment on Wednesday, while BHP maintained its policy of keeping quiet until most of its contracts are signed.

In Europe, where major deals are yet to be announced, Germany's top steelmaker Thyssenkrupp (TKAG.DE) said it hoped to push through price cuts of more than 30 percent for iron ore suppliers.[ID:nL1346150]

SPLINTERED

Wednesday's sudden compromise offered by China highlighted its struggle to wield more clout on global commodity markets, even ones in which it is the dominant buyer. It now imports more than half the world's traded iron ore, but has struggled to form a united front.

Some of China's larger mills have tacitly reached agreements with miners and issued letters of credit to buy iron ore at the price accepted by Japanese mills, the official China Securities Journal reported separately, weakening CISA's position and ignoring threats to revoke import licenses.

It also reinforced China is far from ready to accept a dramatic break with the 40-year-old benchmark pricing system to embrace the volatility and instability of the spot market, where Rio is already selling half its supply and which BHP would like to use as a reference for prices based on indices.