The China Iron Steel Association announced Thursday that China's steel companies will not accept any "unreasonable" demand for a price hike of iron ore "under any circumstances."

The association said Australian mining giant's, BHP Billiton, demand for record-high iron ore prices is "unreasonable and goes against international practice," the Economic Information Daily reported Friday.

"BHP's move is a near-sighted view of the matter and will destroy the 40-year-old international price negotiation mechanism," said the association. "This will hurt the development of China's iron and steel industry and the country's economy."

Meanwhile, the negotiations between BHP and the Chinese steel companies continue and room for negotiation still exists.

China's steel mills reportedly have developed policies to prepare for the worst case scenario in case talks break down.

China has reportedly accepted a record 71.5 percent rise in iron ore prices from BHP rivals, such as Rio Tinto and Brazil's CVRD, in February this year after Japanese firms agreed to the increase.

BHP Billiton is believed to be seeking a freight premium of 7.5 to 10 US dollars a ton on iron ore sold to China on top of the 71.5 percent price rise. This takes the price of iron ore to 50.41 dollars per ton, despite Chinese steel companies flatly rejecting the price push.

BHP insists that the price rise is a reflection of the cheaper shipping costs from its western Australian mines compared to more distant Brazil.

Sixteen Chinese steel mills have already reached an agreement that they will not accept BHP's "unreasonable" demand.

Later this month, the association will hold a meeting to ask more than 70 Chinese steel importers to coordinate their policies and rectify order.

Economists here warned that the sharp price increase of iron ore and other raw materials would have a negative impact on China's economic development in the long run.