Global miners BHP Billiton Ltd, Rio Tinto Group and Vale SA have received requests from China Steel Corp. to suspend or reduce deliveries of iron and coking coal because of a slow output requirement for the raw materials.

A senior company official connected with CSC who asked not to be named said the Taiwanese steel producer had either been canceling shipments or deferring deliveries from the three mining giants, along with other "numerous" coking-coal miners in Australia.

This is the first time CSC has undertaken a reduction capacity utilization scheme since the global fiscal crisis hit. It expects global demand for the construction material to remain weak for the next few months.

"We have to take necessary measures to cope with the falling demand from our downstream customers," the official told Market Watch. "It's very difficult to tell how long the deferral will last. ... We expect the first quarter will still be tough."

"We have seen production curtailments in some sectors and we are generally seeing a more cautious approach in respect of inventory management by our customers," Marius Kloppers, BHP Billiton chief executive officer, told the Taipei Times.

Market volatility is likely to remain high until problems related to the European debt crisis are definitively addressed, he said.

Analysts said CSC's reduction scheme confirms a slowdown of its steel manufacturing. An oversupply of stocks is also possible and that the company may no longer have sufficient space to store both raw materials and steel output.

"Deferring and cutting shipments only happens when demand is really bad," analyst Michael Chung said. "We don't see any signs of recovering demand in the next three months."

In 2010, CSC used 66 per cent of iron ore sourced from Australia, 27 per cent from Brazil and 5 per cent from Canada. It bought 81.5 per cent of its coking coal from Australia and 8.6 per cent from Canada.

The company said its sales of steel products will be 10 per cent to 20 per cent lower in December.

"You don't see it any numbers why they should be doing this, but they must see something," analyst Ken Hoffman told Bloomberg. "Either its orders are flat and they've built up way too much inventory of ore expecting a boom that didn't come, or they're seeing some numbers that we don't have access to that show some sudden cooling."

On Thursday, Taiwan Stock Exchange data showed CSC shares collapsed 1.04 per cent to NT$28.5, down 14.93 per cent so far this year.

"There's clearly a degree of nervousness there" and "product purchases have disappeared from the market because liquidity for them in the form of credit financing has also disappeared," Kloppers said.

BHP Billiton, along with Rio Tinto and Vale, has jurisdiction over 67 per cent of total global seaborne trade, according to Bloomberg Industries.

Related article:

Weakening Global Iron Ore Production Stirs World Prices Anew