Rio Tinto to cut iron ore output 10%

The cut in output "is a prudent move to align production with revised customer delivery requirements in the light of the fourth-quarter drop in Chinese demand," chief executive Tom Albanese said in a statement.

Rio's decision follows a reduction in output by rivals Via. Vale do Rio Doce as weakening global growth saps demand for raw materials in China, the fourth-largest economy and manufacturing hub for many western goods.

The decline may be short-lived after China pledged to spend 4 trillion yuan ($586 billion) starting in 2010 to bolster its economy.

A drop in demand for iron ore may also weigh on supplies of coking coal used to fire the steel mills. Pike River Coal fell 2.6% to $1.12 on the NZX today. Rio's shares jumped 8% to A$70.08 on the ASX and BHP Billiton gained 7.2% to A$29.95 on optimism about China's stimulus package.

By Jonathan Underhill

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