Australia doubts China to scrap iron ore contracts

SYDNEY (Reuters) - Chinese steel-makers are unlikely to drop their current long-term contracts with Australian iron ore producers and move to the spot market instead, Australian Finance Minister Lindsay Tanner said on Monday.

The contract system, which traditionally governs Australia's $14 billion in annual iron ore exports to China, faces an uncertain future, with Chinese steel mills unable to agree contract pricing this year with major iron ore miners.

Anglo-Australian firms Rio Tinto and BHP Billiton are the world's second-largest and third-largest producers of iron ore respectively. Iron ore is Australia's second-largest export behind coal.

"I think that's an unlikely scenario because the important thing for countries like China to have is reliability of supply, consistency of supply. Therefore I think it's unlikely that you would see the contractual patterns that we have seen in the past disappear," Tanner said.

(Reporting by Mark Bendeich)