BHP Billiton and Rio Tinto are continuing their iron ore contract wrangles with China, with the Chinese government indicating it will agree to pay a freight differential to the two mining giants.

China Metallurgical Mining Association Chairman Zou Jian said China is considering including the freight fee but it will only amount to half of what the miners could get on spot markets.

Mr Jian said he is confident the negotiations will be completed before the June 30 deadline, although Chinese steel mills are expected to benefit the longer discussions go on.

China is expected to import about 410 million tonnes of iron ore this year as it urbanises its population, although spot ore prices decreased in March.

“During the first quarter of this year, supply overtook demand by 10 million tonnes. If this trend continues another month, it will benefit the ongoing negotiations,” Mr Jian stated.