SHANGHAI, Mar. 25 -- Iron ore supplies are tight and the existing term pricing system for iron ore is not suitable for either the steelmaking or iron ore businesses, the chairman of China's Baosteel said on Thursday.

"The term pricing system of the past 40 years is not very suitable for the development of steel and iron ore," Xu Lejiang said in a speech at an industry conference.

"Adjustments would be reasonable."

China's steel mills are in talks with global mining giants, including BHP Billiton (BHP.AX: Quote)(BLT.L: Quote), Rio Tinto (RIO.AX: Quote) and Vale (VALE5.SA: Quote), on this year's iron ore supply contracts.

Top iron ore miner Vale said it has implemented a more flexible pricing system for iron ore, shifting from the decades-old benchmark system amid reports it is seeking to more than double ore prices in 2010.