THE main lender to Fortescue Metals Group has extended its search for partners on a $US1.5 billion ($1.44 billion) loan until the end of the month as mining stocks failed to respond yesterday to a rebound in commodity prices.
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 making dramatic spending cuts, but the Bank of America Merrill Lynch, the loan's underwriter, has yet to find willing parties to share in the spoils, Bloomberg reported.
Fortescue shares fell 18?, or 5 per cent, to close at $3.37.
Copper and aluminium traded near four-month highs, and spot iron ore prices rose 7 per cent from Friday to $US95 a tonne after the Chinese government announced plans last weekend to plough as much as Yuan1 trillion ($152 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 analysts warned investors not to take the proclamations of Beijing's all-powerful National Development and Reform Council at face value.
Pointing out that the council had merely published project approvals from recent months in reaction to weak economic data last month, a UBS analyst, Wang Tao, downgraded her forecasts for full-year gross domestic product from 8 per cent to 7.5 per cent. The Japanese bank Nomura and China International Capital Corp lowered their forecasts for Chinese GDP growth on Monday.
Industrial output in China fell to a three-year low last month, according to official data last week. On Monday customs reported a 2.6 per cent decline in imports last month.
Back at 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 five points to minus 2 in overall business confidence.
Murray Bailey, the chief executive of Yancoal Australia - controlled by the Chinese state-owned enterprise Yanzhou Coal - said the information he has suggested "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," he said.
Yesterday shares in BHP Billiton rose 0.4 per cent to $32.58 and Rio Tinto fell 0.3 per cent to $54.53.