RIO TINTO'S confession that the five-year commodities boom was unravelling has triggered a global sell-off in resource equities and mineral commodities.
The big four of the industry - BHP Billiton, Rio Tinto, Xstrata and Anglo American - took their biggest one-day share-price hits since the 1987 crash while the slide in metal prices accelerated, in some cases to below marginal costs of production.
Rio let the cat out of the bag on Wednesday in its September quarter production report. It talked about slowing new production growth, potential cuts in aluminium, the lack of buyer appetite for assets sales and most disturbingly for the equities and commodities markets, a "deceleration in Chinese growth".
In overseas markets, Xstrata plunged 19% and Anglo American 20%. In the local market, Rio tumbled $12.49, or 15.9%, to $66.01 and BHP shed $3.90, or 13%, to $25.80.
Reports from China that steel makers were prepared to cut production by up to 20% to better match demand also spooked the already skittish market in the big miners.
Rio's share-price hit came amid reports that the Chinalco-Alcoa partnership's 9% stake in the group was locked up in a Hong Kong custodial account now managed by the liquidator of Lehman Brothers.
Lawyers for the state-owned Chinalco and Alcoa have descended in Hong Kong seeking the release of the parcel of shares, acquired in a $US14 billion market raid in February.
Alcoa is confident the partnership will regain access to shares while it was reported that Chinalco had asked the Chinese Government to help it resolve the issue.
Rio's takeover suitor, BHP, is a keen observer of the possible lock-up of the parcel. It was the February raid by Chinalco-Alcoa on the Rio register that forced BHP to replace its planned 90% minimum acceptance condition in its Rio scrip bid with a 50% condition.
Prospects that BHP might yet get its hands on the Chinalco-Alcoa stake have improved in line with the global economic meltdown. Both Chinalco and Alcoa are feeling the chill wind of the meltdown in their aluminium operations and are sporting a 63% or $US8.8 billion loss on their investment.
The unlikely situation where the liquidator of Lehman's Hong Kong business takes control of the 9% Rio stake is a new wild card in the BHP tilt for Rio.
In a briefing on its disappointing profit results last week, Alcoa managing director Klaus Kleinfield said the US group's long-term view on the Rio investment was "positive".
He noted that the Australian Government had given approval for Chinalco to increase its stake to 11%, but would not comment on the intentions of Alcoa or Chinalco.
In a surprise to some analysts, Alcoa did not make any write-downs on the cost of its original $US1.2 billion investment in the February raid on Rio.
The beating taken by BHP shares has reduced the value of its 3.4-for-1 scrip offer for Rio to $104 billion. That is down by close to $20 billion in the past five trading days.
The implied value of the offer of $87.72 a Rio share still represents a record 32% premium to Rio's market price of $66.01 a share (2.55 BHP shares).
