WRAPUP 1-Iron ore talks set for overtime as China holds out

* Iron ore talks down to the wire, 11th hour deal unlikely

* China, Rio stick to their positions, talks set for Weds

* Rio will maintain shipments, but pricing up to customers

* End of 40-year-old annual pricing regime could be temporary

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By Alfred Cang and Jim Regan

SHANGHAI/SYDNEY, June 30 (Reuters) - China and big miners were deadlocked in 11th-hour negotiations over annual iron ore prices on Tuesday, officials said, likely spelling the end -- at least temporarily -- of a four-decade-old pricing regime.

A source at the China Iron and Steel Association and a senior executive at the country's No.2 steel mill both said the negotiations are likely to continue past the June 30 deadline for extending annual supply contracts, pushing China, which buys half of the world's traded iron ore, onto the volatile spot market.

Rio Tinto (RIO.AX) (RIO.L) has stuck by that deadline for agreeing on prices for 12-month contracts that run from April 1, showing no inclination to go lower than the one-third price cut it agreed with Japan and South Korea and saying it is ready to sell to its customers on whatever basis they prefer.

It remains to be seen whether the two sides manage to broker a deal in the coming weeks that would allow them to restore the supply security offered by annual contracts, or turn entirely to trading the main ingredient for making steel on the spot market, opening the door to a potentially huge derivatives market.

What is clear is that a last-minute deal is unlikely.

"The two parties are still holding their requests and have not been closing their demands. So I cannot say if there is any room for each party to concede," Tian Zhiping, the vice-general manager of Hebei Iron and Steel Group, told Reuters.

In reality the shift is already underway -- Rio has sold half its ore on a spot basis this year, and No.3 iron ore miner BHP Billiton (BHP.AX) (BLT.L) has long encouraged the development of more market-based pricing to replace the inelastic benchmark.

A greater dependence on spot markets would subject Chinese mills such as Baosteel (600019.SS), Wuhan Iron and Steel (600005.SS) and Hebei (000709.SZ) to greater cost uncertainty than their regional rivals that have stuck with annual prices.

That's a risk the industry is prepared to face in order to drive home its demands for a bigger break on prices after a collapse in steel demand drove many mills into the red, caught between record-high 2008 iron ore and falling steel prices.

"We made a statement in late May that we would not accept the price reached by Japanese steel mills and Rio Tinto, so we will keep negotiating," a source at the lead negotiator China Iron and Steel Association told Reuters. "Therefore, we are still in the negotiations until an official statement is made."