The World Steel Association (worldsteel) believes new iron ore contracts will have a negative impact on the global economy.

It expressed concern at the inevitable consequences of imposed pricing settlements and possible abuse of dominant positions by the main ore suppliers.

Ian Christmas, worldsteel’s director general said: “The benchmark system may have imperfections but it had the merit of supporting long-term relationships between the steel industry and raw materials suppliers.

“The move to spot pricing will be volatile and benefit neither side in the medium to long term.”

He added that the reason for the mining companies being able to impose the change because of the uncompetitive market for sea-borne iron ore.

He said Brazilian company Vale had a virtual monopoly in the Atlantic basin while Rio Tinto and BHP Billiton a virtual monopoly in the Pacific basin.

He stated: “There is now an urgent need for the competition authorities around the world to examine the market for iron ore, and the market behaviour of the three companies who dominate the business.”