Rio Tinto has followed rival mining firms and says it is negotiating new iron ore supply contracts priced for three months rather than a year.

The move ends years of tradition and is seen as a demonstration of the power the miners have over their customers.

Demand is at record levels, especially from China, whose appetite for ore and other commodities continues to grow.

Last month, BHP Billiton and Vale agreed quarterly contracts with some Asian steel mills.

Japan and South Korea seem to have accepted the change, but China's position is less certain.

Sam Walsh, chief executive Iron Ore and Australia, said "Rio Tinto's position reflects the recent structural shift in the iron ore market away from benchmark pricing. It is in line with our recent comments that benchmark pricing only works if it reflects market fundamentals, otherwise the system would need to change."

The old yearly pricing system caused huge friction. When the spot - open market - price fell significantly below the annual price, customers complained, and when it rose above the set price, it was the miners that were unhappy.

The most recently struck contracts are, on average, priced 100% higher than last year's prices.