CHINA'S efforts to tackle inflation are dampening demand for one of Australia's most crucial export commodities, according to Australia's third-biggest iron ore producer.
Despite booking a profit of $US1.023 billion ($A977,690 million), Fortescue Metals Group chief executive Nev Power said the company had noticed changing behaviour in recent months by the Chinese steel mills, which dominate its customer base.
China has been battling an inflation problem this year, with a three-year high inflation figure of 6.5 per cent reported in July.
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The Chinese government has tried to curb the problem by lifting interest rates and forcing banks to hold greater amounts of capital, and Mr Power said Fortescue had felt the impact of those measures.
''There is no question that the tightening of credit in China has started to moderate demand in a small way,'' he said.
Mr Power stressed that no shipments of Fortescue's iron ore had been deferred and that prices were holding firm, but he confirmed there had been a cooling of Chinese sentiment.
''What we have seen is that the steel mills have become a little more short-sighted in terms of their future buying, so while we've not had any impact on a month-to-month basis, we have seen a cooling off as you look forward in the market,'' he said.
Iron ore is Australia's most valuable export commodity, and is forecast to be worth $65.3 billion to the nation this year.
China and India are the main buyers, and the construction boom in those nations is forecast to keep global demand for iron ore very strong until at least 2014. Echoing those thoughts, Mr Power sought to quash any notion that the softening he described might be a sign that iron ore demand had passed its peak.
''I think everybody expects that once the inflation numbers in China are back under control the underlying demand is very strong and that would pick straight back up again,'' he said.
UBS analyst Tom Price said Chinese leaders were likely to lift credit flows if the inflation outlook improved in coming months, and such a move would have an ''immediate'' effect on stimulating demand for iron ore.
The two biggest exporters of Australian iron ore - BHP Billiton and Rio Tinto - both declined to comment when asked if they had noticed any change in the behaviour of Chinese customers.
Fortescue plans to almost triple its iron ore production to 155 million tonnes by 2013, and the company said the recent volatility on global markets would not deter it from seeking up to $1.5 billion from debt markets to help achieve that goal.