Brazil's Vale, one of the world's top three miners, said on Friday that Chinese demand for metals was down sharply but that it wouldn't ship iron ore without a 12 percent price increase.
"Chinese demand is much weaker; there are cuts in steel production there," Fabio Barbosa, chief financial officer, said on a conference call with investors.
Global demand for metals and minerals would weaken further in coming months due to the deepening of the global financial crisis, he said.
"We now face a new global scenario," Barbosa said.
But Vale would not ship iron ore to China without obtaining a 12 percent price increase, which the Chinese have been refusing to pay, Barbosa said.
China is Vale's main market for iron ore and pellets.
Vale would wait for its competitors to sell iron ore cheaply now but expected higher-cost producers to disappear from the market soon.
"Some inefficient suppliers will be out of the market in a few months, next year we'll renegotiate the price in a new environment," Barbosa said.
The company announced net profit on Thursday of $4.8 billion, up 64 percent from the same period last year, on record gross revenues and iron ore sales.
The world's biggest iron ore producer could hold out for a while, said Chief Executive Officer Roger Agnelli.
"We are not pressed to sell our products at any price," Agnelli said.
Agnelli expects a very deep recession of 6-10 months and Barbosa said Chinese demand should begin to recover in the first half of 2009.
"Long-term fundamentals are strong, we are in a pause," he said.
Agnelli said the company is reducing production at some high-cost operations, including a 20 percent cut in nickel output at its Indonesia unit as well as a 65 percent reduction in activity at the company's Dalian processing unit in China.
"We are shutting down our diesel generators in Indonesia, where we are at full capacity, and we will run on hydroelectric. In Dalian, in China, the market practically disappeared," Agnelli said in a news conference on Friday.
Agnelli added that the company would also suspend purchases of iron ore from third party suppliers until world demand improved.
The economic downturn also provided opportunities, Agnelli said.
"Certainly in the future we are going to see a lot of depreciated assets that we can analyze to see whether they fit to our strategy," Agnelli said.
"If it adds value to our shareholders, we are ready to move," he said, adding that acquisitions were currently not a priority for the company.
The company denied rumors this week that it was preparing a renewed proposal to buy a stake in Swiss rival Xstrata.
Vale shares closed down 5.36 percent on the Sao Paulo Stock Exchange, at 22.05 reais on Friday.
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