The mainland's largest steel mills signed an accord yesterday pledging not to unduly profit from iron ore sales to their smaller rivals, to support Beijing's goal of creating a more regulated iron ore market. The agreement was reached at a meeting in Tangshan, Hebei province, initiated by the China Iron and Steel Association (Cisa). The accord came a day after the State Council said it would regulate iron ore imports and the steel products market more strictly as part of the government's support package for the struggling industry. The accord is also viewed as a way to boost the mainland's bargaining power in ongoing iron ore contract price negotiations with overseas suppliers, mainly in Australia and Brazil. Under the current quota system, the mainland has about 112 licensed iron ore importers. Seventy are large steel mills regulated by Cisa and 42 are iron ore trading companies regulated by the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters. Only these licensed companies are allowed to import iron ore, a limitation designed to prevent rival steelmakers from driving up spot prices. But smaller mills without import licences complain that they must buy imported iron ore at high spot prices from large state-owned trading companies and mills, which source ore at much lower contract prices from the world's Big Three suppliers. Critics also said high spot ore prices and large ore stockpiles at ports in the first half of last year stemmed from hoarding and speculation on iron ore by traders. Under the new rules, mills that import more than they use could only sell the remainder at the contract price plus a service fee of 3 to 5 per cent, the Shanghai Securities News reported, quoting Wu Xichun, a Cisa adviser. If licensed importers violated the rules, they would receive a warning for the first offence and risk losing their licences for a second violation, the paper said. Su Jiangang, the general manager of Maanshan Iron & Steel, which has an import licence, said his company sent representatives to the industry conference. But he stressed that all the ore his company imported was only slated for internal use and that it did not sell ore to other mills. Mr Su said a more regulated iron ore market would reduce volatility in iron ore prices, which would benefit steelmakers. Hu Hao, a steel analyst at Central China Securities, said capping the profits on licensed importers' sales of excess ore would reduce spot market prices, which in turn would encourage lower contract prices. Baosteel Group, the mainland's top steelmaker, began talks to set annual contract prices with Rio Tinto in Shanghai this week. Earlier reports said the mainland steelmaker, the world's largest buyer of iron ore, would demand price cuts of 39 to 45 per cent for this year, after iron ore prices rose over the past six years to a record.