Bloomberg reported that Rio Tinto Group is studying possible cuts to production of the steelmaking material in Western Australia as demand for cars and construction materials swoons.
Mr Gervase Greene spokesman for Rio Tinto said that "The global financial crisis is having an impact across the sector and we have seen a number of announcements in recent days from customers and producers reflecting that. We are still assessing the situation and have not yet made any decisions with regards to our current operations.''
Slowing economies have slashed steel demand, damped prices and in October made mills unprofitable in China, the biggest producer of the metal. Cia Vale do Rio Doce, the largest iron ore supplier, began output cuts last month and doesn't expect a market recovery until next year.
Mr Ken West partner at Perennial Investment Partners Limited in Melbourne said that "The next two to three quarters will be very grim for producers. Rio does not want to have a huge oversupply of iron ore as they enter price negotiations.''
Chinese steelmakers have begun initial talks for 2009 iron ore contract prices with Rio, Vale and BHP Billiton Limited, Shan Shanghua. Rio and BHP may be forced to cut prices by 15% next year, ending 6 years of gains.