Rio Says Some China Iron Ore Buyers Had Credit Difficulties

Dec 2, 2011 -- Rio Tinto Group (RIO), the world’s second- biggest iron ore exporter, said some Chinese buyers have had credit difficulties while its customers are still purchasing every ton of the raw material it produces.

The Chinese government “has certainly tightened up the credit availability,” Greg Lilleyman, president of the London- based company’s Pilbara iron ore operations in Western Australia, said today in Perth. “There have been, over a period of time, some difficulties with some customers to raise credit to be available to purchase iron ore.”

China posted the lowest inflation in five months in October after a year-long campaign to tame prices that included higher interest rates, lending curbs and restrictions on home purchases. Premier Wen Jiabao said in October the government will fine-tune economic policies as needed to sustain growth while pledging to maintain curbs on real estate.

China’s economic growth cooled to 9.1 percent in the third quarter from a year earlier, the slowest pace in two years. The credit-tightening policy has curbed demand and prompted local mills including Baoshan Iron & Steel Co. (600019) to cut prices, while the debt crisis in Europe raised concerns that economic growth may slow in emerging countries, Tokyo Steel Manufacturing Co. said Nov. 21.

"Our customers are still buying lots of iron ore, we can sell every ton that we can produce and we are still getting good prices for it.,” Lilleyman said. “We certainly haven’t had any customers turn away or any boats turned away or anything like that.”

Rio this week boosted its production expansion capacity target for its Australian iron ore operations by 20 million metric tons a year to 353 million tons. Iron ore usage in China, the biggest buyer, will double by 2020 from 2008, according to Rio.