The "China Iron Ore Prices Index" will include domestic and import ore prices and be released weekly, CISA said at a news conference on Tuesday.
Zhang Changfu, vice-chairman of CISA, said since China is the world's largest iron ore consumer, the country needs a more transparent and fair price index.
The domestic component will be based on dry iron ore concentrate from 32 mines in 14 provinces and regions. The import prices will be based on data from eight ports.
Li Xinchuang, vice-secretary general of CISA, told China Daily earlier that data from the international commodity and energy information provider Platts only reflected a small portion of spot iron ore trade.
Currently, foreign companies such as Platts, the Metal Bulletin (MB) and The Steel Index (TSI) publish iron ore indexes based on the spot market. Platts' index is used by the three major global iron ore producers: Vale SA, Rio Tinto Group and BHP Billiton Ltd.
Chinese industry participants and steelmakers say this indicates that Platts works in the miners' favor.
Platts reported the price for ore with 62 percent content touched $178.50 on Monday.
However, TSI calculated the price at a slightly lower $176.10 and MB put it at $175.75.
All three were spot prices for imported ore.
The three biggest ore miners abandoned a 40-year tradition of setting prices with Chinese steelmakers annually last year, opting to reset contract prices every month or quarter, based on spot prices.
David Hanna, senior director of Asia Business Development at Platts, told China Daily earlier that Platts supports CISA's efforts to develop an iron ore index.
The Chinese domestic market is essential to the global iron ore market, he said, and CISA's participation would make this market even more efficient.
An executive from one of the three miners, who spoke on condition of anonymity, said they chose an index that is more accurate and objective to mirror the market.
Analysts said the question is whether China's iron ore indices will be acknowledged both in the domestic and overseas markets.
State-controlled Xinhua News Agency and Chinese consultancy firm Custeel.com already issue indices based on domestic and import prices, but none of these have been accepted by the global miners.
"CISA, the authoritative steel organization, which has multiple channels to collect data, will deliver more objective and all-inclusive ore prices," said Xu Xiangchun, a senior analyst with consultancy firm Mysteel.com.
He said the reason for the establishment of the country's own indices is to have a say in the ore market.
"Chinese steel mills prefer to use an index that works in their favor. Apart from the three giant miners, there are also other overseas miners who might consider the index from the Chinese side," said Xu.
China's iron ore imports declined 4 percent in June from May, according to the General Administration of Customs, but were 8 percent higher year-on-year.
Domestic iron ore production climbed 13 percent to a record 102.5 million tons in May from a year earlier, according to Bloomberg data.
Imported ore prices surged 42.4 percent year-on-year in the first half, meaning additional costs of 104 billion yuan ($16 billion) for the Chinese steel industry, according to CISA's statement.
Zhang told the news conference that China's crude steel output was likely to reach 700 million tons in 2011. Chinese steelmakers have the capacity to produce 800 million tons a year, but half of that capacity fails to meet State quality standards.
The Ministry of Industry and Information Technology said on Tuesday that steel output might slow in the second half on lower industrial production growth, power outages and tighter credit curbs.