China Steel Mills Slowing Ore Demand, Mt. Gibson Says

Steel mills in China, the world's biggest producers, are cutting demand for iron ore and asking miners to postpone deliveries because of slower sales and a lack of credit, said Mt. Gibson Iron Ltd., an Australian producer.

``Customer and iron ore sector analysis indicates a slowdown in demand for iron ore in China due to current economic uncertainty and the tightening of credit facilities,'' the Perth- based company said today in a statement to the Australian stock exchange. Mt. Gibson said it received requests to delay shipments until the second quarter of the financial year.

Chinese mills have slowed production, sending cash iron ore prices down 17 percent in the last week of September. The global financial crisis has locked corporates out of capital markets after financial companies booked more than $592 billion in writedowns and credit-market losses since last year.

``The rest of the world is cutting production and that means they don't need China's exports, so China's production in steel is going to slow,'' said Glyn Lawcock, head of resources research at UBS AG. ``That puts the pressure back upstream on raw material suppliers like the iron ore producers and coking coal.''

Mt. Gibson fell 24 percent to 88 cents on the Australian stock exchange, the biggest drop since Jan. 17, 2002.

The company said it has no obligation to delay deliveries as customers are contractually bound to buy the ore. Mt. Gibson sells ore to companies including Rizhao Steel Holding Group Co., CITIC Australia Commodity Trading Ltd. and Marubeni Corp. Rizhao declined to comment when contacted today.

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