Brazilian mining company Vale will raise iron ore prices about 35 percent to as much as $145 per metric ton in July as part of a switch to quarterly pricing, a Brazilian newspaper reported on Sunday,

Markets widely expect iron miners to boost prices to bring them in line with spot ore prices following a shift away from a decades-old benchmark system, although analysts were still unsure exactly how the new pricing mechanism works.

O Estado de Sao Paulo newspaper did not say where it obtained details about the percentage of the price increase by Vale , the world's largest iron ore miner.

But it cited Vale Ferrous Metals Director Jose Carlos Martins confirming the company would raise prices for steelmakers.

In the second quarter, our prices were well below the spot market price in China, Martins told the paper.

Under the current formula, our expectation is to recover a large part of that difference in the next quarter, which starts in July, he said, apparently referring to a system of indexes that adjust prices based on the spot market.

The world's top three iron ore miners -- Vale and Anglo-Australians BHP Billiton and Rio Tinto this year dumped the benchmark in favor of quarterly pricing, but the exact nature of how they calculate the price has not been fully disclosed.

The exact amount of the price increase will be determined on Tuesday, the newspaper said.

A Vale spokeswoman said the company would not comment on the information.

Interfax this month reported Vale was asking Chinese steel mills to pay an iron ore price of $160 per metric tone in the third quarter -- 23 percent more than in the second quarter -- citing an unnamed source at Wuhan Iron & Steel.

Vale has said it was open to negotiating different indexes or a basket of indexes and different averages, but it did not disclose which index it mostly settled its prices based on.

Some analysts said the company was using the Platts Iron Ore Index, which is cleared by the InterContinental Exchange (ICE). Currently, there are three index providers: Platts, The Steel Index and Metal Bulletin Iron Ore Index.

Spot iron prices have fallen some 20 percent to $145 per metric tone since late April highs near $185 as buyers fret about the resilience of China's economy and the strength of steel demand in the second half of the year.

(Reporting by Brian Ellsworth, Editing by Sandra Maler and Maureen Bavdek)

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