Here are some questions and answers about the state of play:

* WHAT HAPPENS TO ORE SALES NOW THE JUNE 30 DEADLINE HAS PASSED?

Miners and steel mills are no longer obliged to abide by benchmark prices. For now iron ore buyers and sellers will transact their Chinese business on a spot or tender basis. Goldman Sachs estimates the spot market is already an annualised 280 million tonnes, or 30 percent, of total seaborne trade.

* WHAT HAPPENS IF MINERS REJECT CHINA'S COMPROMISE OFFER?

The China Iron & Steel Association (CISA) has said it is willing to pay more than the original 40 percent cut from 2008 prices that it originally insisted on. But unless the two sides agree on a compromise, miners are free to sell ore under any terms agreed by buyer and seller.

The most likely long-term format will be sales based a combination of quarterly or semiannual spot price average at time of delivery and the fixed prices at 33 percent below 2008/09 agreed by steelmakers in Japan, South Korea and Taiwan.

* WHAT COULD CHINA GAIN OR LOSE BY PROLONGING NEGOTIATIONS?

Spot prices could fall, providing a stronger case for lower benchmark prices. Equally, a stronger spot price will strengthen the hand of supplies, and also mean that Chinese mills are paying more for their raw material than their Japanese or Korean rivals.

* CAN CHINA SUPPLY ENOUGH ORE FROM ITS OWN MINES IF IT NEEDED TO?

No. Much of China's iron ore reserves are low grade, which means mines would have to be dug much deeper and at a higher cost than in other countries such as Australia, Brazil and Canada to retrieve the same amount of ore. Even at last year's record high prices it was cheaper to import ore than mine it at home.

It is estimated that around 20-30 percent of China's domestic mining capacity, or around 100 million tonnes a year, has shut over the past six to nine months due to iron ore prices dropping below their production costs, Maquarie said.

* WHO DOES CISA REPRESENT IN PRICE NEGOTIATIONS?

CISA claims to represent 72 of China's biggest steel mills, accounting for 80 percent of the country's total steel making capacity.

* WHY DOES CISA INSIST ON PAYING LESS THAN OTHER COUNTRIES?

CISA claims it deserves a discount to other countries because of its ranking as the world's largest iron ore consumer and importer. China imported 444 million tonnes of iron ore in 2008, more than half the world's seaborne iron ore trade.

* WILL SPOT MARKET PRICES CONTINUE TO GO UP?

Spot prices have risen 20 percent in the last month to around $80/T delivered China, but the odds of more upside look poor unless demand growth returns in Europe. Until that happens, Vale of Brazil will continue to divert tonnage to the Chinese spot market that will apply downward pressure on prices.

* CAN THE BENCHMARK SYSTEM BE SALVAGED OR IS IT DOOMED?

Its best chance of survival is in Europe, where it enjoys wide support among buyers and sellers. In Asia, BHP Billiton over the next nine year is phasing out benchmarking. Rio Tinto is increasingly diverting ore to the spot market, and said it sold half its ore this way in the first half of this year.

(Reporting by James Regan; Additional reporting by Alfred Cang in SHANGHAI; Editing by Michael Urquhart)