UPDATE 2-China steel group sees iron ore price rise next yr

* China steel group sees iron ore prices rising in 2010

* But CISA says little room for iron ore price rise

* CISA says domestic crude steel supply up 25 pct in 2009 (Adds quotes from analysts, Rio Tinto)

By Shao Xiaoyi and Tom Miles

BEIJING, Nov 3 (Reuters) - China has said it expects to see a modest rise in iron ore prices in the next round of annual term talks, although it has not yet settled on prices for this year.

The China Iron and Steel Group (CISA), which sees itself as a policy coordinator but acts as the country's top negotiator in the talks, said iron ore prices were likely to increase in 2010 even though Chinese steel mills were facing losses.

This is the first time the association has commented on the iron ore price trend for the next fiscal year, after spending months trying to resist a 33 percent price cut in iron ore prices this current fiscal year that was accepted by rivals elsewhere.

CISA's Vice Chairman Luo Bingsheng declined to comment on whether the rise would be based on the 33 percent price cut that Australian miner Rio Tinto offered, or a 35 percent cut that China agreed to with Fortescue Metals Group.

However, Sam Walsh, head of Rio's iron ore division, said at a briefing on Monday that the company was now selling at the "provisional" 33 percent discount and that price would "clearly be the starting point for negotiations next year."

Negotiations for 2010/11 prices will begin soon, Luo said, and analysts are already expecting a 10 percent rise in term prices for the next April-March fiscal year as steel production picks up.

Hu Kai, analyst with the Umetal consultancy, said a recovery was on the way, with global pig iron production in September up to 70.8 million tonnes, only 5.2 percent lower than the record set in May 2008.

"I think (steel) demand will be boosted in the next year and support ore prices," he said.

For a graphic showing China's iron ore imports, click: here

SPECIAL PRICE

China wants a special deal in annual iron ore price talks as the world's biggest consumer of the steel ingredient, adding it does not have to follow prices set by other countries.

Rio's Walsh said a separate "China price" was one of the options now being considered, but Su-Aik Lim, steel analyst with Fitch Ratings in Beijing, said the preferential treatment of China could cause problems.