by: Robb M. Stewart From: The Australian

If conditions don't improve, Chinese steelmakers could slow imports as inventory is already high at ports and steel mills, says Zhang Changfu, vice-chairman of China Iron and Steel Association, a quasi-government body representing steel mills. "I haven't heard of any delay in shipments," Zhang says. "But I think we could delay purchases due to the uncertainty in the market and high inventory," Zhang says. He notes that current inventory in the country is enough to support production for about 35 days.

On the sidelines of a steel conference in Qingdao, Brazilian miner Vale's executive director for marketing, Jose Carlos Martins, says the miner is aware of complaints from steelmakers that their profit margins are being squeezed by high input costs despite the pressure on steel prices. Vale's Chinese and European customers haven't asked for a delay in iron ore shipments so far despite the pessimistic short-term outlook for steel demand, but some are under considerable pressure, Martins says."We always would like to sit down with our customers and talk," he says. It's not possible for us to say it doesn't matter how (they) operate."

However, traders say there is a great deal of scepticism in the market over where iron ore prices are heading amid concerns that faltering economic growth in the US and Europe could spread to Asia. Iron ore import prices for China delivery fell to $US180 a tonne last week, down about 4.8 per cent since the start of the month, according to Metal Bulletin data. In the July-September period, prices had rallied about 8 per cent. "There is talk that some customers have asked exporters to hold off loading some ships," Peter Esho, chief market analyst at City Index in Sydney, says. But an official representing a smaller steel mill in China says this could well be a "negotiation strategy" as steel mills are always looking for lower prices. "Some steel mills said they will have to ask to delay shipments if steel prices remain sluggish while iron ore prices remain high in the coming months.

Rio, BHP and Fortescue are investing billions of dollars to ramp up production capacity in the Pilbara, which accounts for about 40 per cent of the world's trade in iron ore by sea. Rio Tinto last week told investors in London and New York that commodity prices were still robust, although there was increased volatility and markets were weaker than they were six months ago.