BEIJING (AP) -- China announced an iron ore supply deal Monday with an Australian miner in an apparent effort to prod global suppliers to cut prices in deadlocked contract talks but the lead foreign negotiator said it would have no impact.

Fortescue Metals Group agreed to a price about 3 percent below what global producers want from Chinese mills. But the ore quality is lower and the supply is a small fraction of China's huge consumption, undercutting its importance as a basis for prices.

China is trying to use its status as the world's biggest steelmaker and consumer of iron ore to press suppliers for deep price cuts following two years of hikes totaling more than 100 percent. Major suppliers agreed to a 33 percent cut with Japanese and Korean mills this year but Beijing wants bigger reductions.

China is trying to reduce reliance on the three global producers -- Anglo-Australian miners Rio Tinto Ltd., BHP Billiton Ltd. and Brazil's Vale SA -- by reaching out to smaller producers and helping to develop mines in Africa.

"The deal breaks the market impasse that had enveloped the Chinese iron ore industry and created uncertainty and risk," Fortescue said in a statement.

A Chinese Commerce Ministry spokesman, Yao Jian, said Beijing welcomed the "new model" of negotiating prices outside talks with major suppliers. But Yao did not say whether the Fortescue deal was expected to influence those talks.

Rio, which is negotiating with China on behalf of BHP and Vale, said the deal would have no impact on its talks.

"We do not see this pricing agreement as relevant to our pricing for fiscal 2009," the company said in a statement.

Tensions over the talks have been fueled by the detention in July of four Rio employees who Chinese state media say are accused of paying bribes to obtain confidential information on China's negotiating stance. The Rio employees were formally arrested last week on charges of infringing trade secrets and bribery.

The Fortescue deal sets a benchmark for its ore, which has a lower concentration of iron, but is unlikely to affect other prices, said Peter Strachan, an industry analyst in Perth, Australia. He said Fortescue's ore is 54 to 57 percent iron, compared with up to 64 percent in ore supplied by Rio and BHPB.

"Just because Fortescue is selling its product on those terms doesn't mean others are available at the same price," Strachan said.

Still, the deal could give a boost to Fortescue, an ambitious newcomer that has built up production despite competition from Rio and BHPB. Fortescue, based in East Perth in Australia's West Australia state, sold a 16 percent stake to Chinese steelmaker Hunan Valin Iron and Steel Group in February to help finance its expansion.

Fortescue is to supply 20 million tons of iron ore to Baosteel Group, China's biggest steelmaker, for 94 U.S. cents per dry metric ton, or $55.50 per ton -- below the 97 U.S. cents paid by Japanese and Korean mills. Last year's price was $1.44 per dry metric ton.

Fortescue's promised supply is more than half its annual production of about 35 million tons but equal to just 4 percent of China's consumption last year of about 450 million tons.

"Fortescue is trying to secure its position and its cash flow by locking in a price that makes sense," said Strachan. "From Baosteel's point of view they see this as an opportunity to secure a source of supply at a reasonable price.

The deal also is dependent on China helping to arrange up to $6 billion in financing by Sept. 30 to support Fortescue's expansion, the company said.