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Beijing plans to reduce the huge iron ore stocks at Chinese ports to curb soaring freight rates, which are hampering 2008 price negotiations with Australian mines, the official Shanghai Securities News said on Tuesday.

Quoting unnamed sources familiar with the situation, the newspaper said the move should help to break a deadlock in price negotiations between Chinese steel mills and Australian miners BHP Billiton Ltd/Plc and Rio Tinto.

The newspaper gave no details on how the government planned to reduce the ports’ iron ore stocks and government officials were not immediately available for comment.

Asian steelmakers are locked in negotiations with the Australian miners, which are demanding a freight premium to make up for the difference in transport costs with Brazilian miner Vale which has already agreed to a deal.

With April iron ore imports reaching 42.85 million tonnes, their highest monthly level ever, port stocks were estimated at about 62 million tonnes as of end-April, and imports continue to arrive faster than stocks can be sold.

The huge stocks have filled up port yards, causing serious congestion at Chinese ports and adding to upward pressure on freight rates for dry bulk cargoes.

The benchmark Baltic Dry Index hit a record of 11,709 overnight, helped by strong demand for raw materials in China and port congestion in various regions, including China.