* Current price mechanism is 'unreasonable' -CISA vice chairman
* China iron ore prices up 114% year-to-date, near record high
By Tom Daly
Dec 15 (Reuters) - Miner Rio Tinto (LON:RIO) RIO.AX is willing to work with iron ore consumers to review the pricing mechanism for the steelmaking ingredient, the China Iron & Steel Association (CISA) said, as near-record high prices squeeze margins at Chinese mills.
CISA recently called on regulators in China, the world's top iron ore consumer, to investigate a spike in prices on the Dalian Commodity Exchange DCIOcv1 , saying there were signs speculators had piled in. a video call with Rio Tinto on Tuesday, CISA vice chairman Luo Tiejun described the current pricing mechanism as "unreasonable" and "not conducive to the long-term healthy development of upstream and downstream," according to a statement from the association.
"Both suppliers and consumers must study and establish a new pricing mechanism instead," Luo said on the call with Rio Tinto representatives, including Simon Farry, vice president for iron ore sales and marketing at the miner.
Rio Tinto noted strong demand for iron ore and understands the challenges volatile prices pose for end-users, the CISA statement said, adding that the miner was willing to work with the demand side to optimise and improve the mechanism.
Rio Tinto, one of China's biggest iron ore suppliers, did not immediately respond to a request for comment.
Dalian iron ore has gained around 34% in the fourth quarter and climbed back above 1,000 yuan ($153) per tonne on Tuesday after hitting a record 1,042 yuan on Dec. 11. Tuesday's call, Rio Tinto also said recommendations in Australia on mining reforms to protect indigenous heritage sites may mean a tougher approval process for new projects but would not affect those under construction, CISA said. Western Australia, Rio Tinto's Robe River project is expected to start production in the second half of next year and the Gudai-Darri mine is set to follow in early 2022, it added. ($1 = 6.5405 Chinese yuan renminbi)