Brazilian iron ore miner Vale is not in talks with Chinese steelmakers on 2009 benchmark prices and will likely keep offering provisional prices on ore shipments, Chief Executive Roger Agnelli said on Tuesday.

Vale (VALE5.SA)(VALE.N) in April agreed to grant Chinese steel mills a 20 percent discount on 2008 benchmark prices in provisional contracts until new term prices were settled.

But annual price negotiations between the world's largest iron ore miners and China's steel industry broke down, after China refused to accept the 33 percent cut in term prices that was offered by Australia's Rio Tinto (RIO.L) and accepted by rival Japanese and South Korean steel companies.

If you have a contract (which) is being honored. You sell, you receive, what do you need to negotiate? Agnelli told reporters on the sidelines of a seminar regarding the provisional prices for ore going to Chinese clients.

Vale said it is also selling ore to Chinese clients at spot market prices.

Everything is fine... We're not negotiating anything, he added.

Agnelli said the accord was evidently fair since spot prices were much higher than contract prices and the company is honoring the provisional contracts.

He said steelmakers are restoring inventories after a strong decline in stocks that bottomed out at the end of the first quarter and beginning of the second.

Several companies are resuming production, several blast furnaces are being activated, and they need a minimum of stocks, Agnelli said, adding the company is currently operating at nearly full capacity due to high demand. (Reporting by Inae Riveras; editing by Reese Ewing and Marguerita Choy)

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