FORTESCUE Metals Group's main lender has extended its search for partners on a $US1.5 billion loan until the end of the month as blue-chip mining stocks failed to respond to a rebound in commodity prices as project delays and slowing Chinese economic growth battered business confidence.
The self-styled "new force in iron ore" held a teleconference last week to reassure lenders about the company's financial position after a series of dramatic spending cuts, but Bank of America Merrill Lynch, the loan's underwriter, has yet to find willing parties to share in the spoils, says a Bloomberg report.
Fortescue shares lost 18?, or 5 per cent, to close at $3.37 yesterday.
Copper and aluminium traded near four-month highs, and spot iron ore prices spiked 7 per cent from Friday to $US95 a tonne after Beijing last weekend announced plans to plough as much as 1 trillion yuan ($A152 billion) through the economy via the construction of yet more airports, railroads, freeways and water treatment plants.
But analysts and commodity traders were unsure about the legitimacy of the plans and whether the rally in commodity prices could be sustained.
"This isn't new stimulus the stockmarket shouldn't be overreacting to this sort of thing," said Yi Xianrong, an economist with the Chinese Academy of Social Sciences, a leading government think tank.
In a note to clients, UBS analyst Wang Tao warned investors not to take the proclamations of Beijing's all-powerful National Development and Reform Commission at face value.
Pointing out the NDRC had merely published project approvals from recent months in reaction to weak economic data last month, Ms Wang downgraded her forecasts for full-year GDP from 8 per cent to 7.5 per cent.
Industrial output in China fell to a three-year low in August, according to official data last week, while on Monday, the customs office reported a steep 2.6 per cent decline in imports last month.
Back home, miners posted the biggest fall of any sector in National Australia Bank's latest business sentiment gauge, tumbling 14 points to a reading of minus 13 for last month, compared with a fall of 5 points to minus 2 in overall business confidence.
Murray Bailey, the chief executive of the Australian-listed Yancoal Australia controlled by Chinese state-owned enterprise Yanzhou Coal said the information he has suggests: "There's probably a couple hundred million tonnes of surplus capacity in the steel industry in China that has yet to be wound down..
"Certainly [in] the metallurgical coal game and iron ore, there's several more months if not quarters of weakness remaining."
Shares in BHP Billiton gained 0.4 per cent to $32.58 and Rio Tinto lost 0.3 per cent to $54.53 yesterday.