BHP Billiton risks upsetting China, one of the mining group’s biggest customers, with its plan to replace the iron ore annual benchmark pricing system with a new mechanism based on an over-the-counter forward market.

The Anglo-Australian miner, Rio Tinto, and Brazil’s Companhia Vale do Rio Doce (CVRD), the world’s top three iron ore suppliers, each year lock horns with steelmakers, led by the Chinese, when they set the annual price for iron ore.