Australian iron ore miners, key beneficiaries of China's modern-day industrial revolution, on Tuesday signaled demand growth was finally slowing in response to Beijing's moves to cool its economy.

It was the strongest indication yet from an industry closest to China's phenomenal industrial growth over the last decade that the boom times, if not over, are tempering.

China has drawn iron ore from all over the world to feed its steel mills, offsetting a paltry home endowment of ore, but nowhere as much as Australia, where output has gone from 80 million metric tonnes (88.19 million tons) a decade ago to nearly 500 million metric tonnes now.

BHP Billiton , the world's biggest miner, said it was seeing signs of flattening iron ore demand from China, though for now it was pushing ahead with ambitious plans to expand production even further.

Rival Rio Tinto said it too was sticking with plans to lift capacity from its mines in Western Australia's Pilbara iron ore belt, betting on a soft landing for the Chinese economy.

The (Chinese) economy is shifting, it's changing. Steel growth rates will flatten and they have flattened, Ian Ashby, president of BHP's iron ore division, said ahead of the Global Iron Ore & Steel Forecast Conference in Perth.

China's demand for iron ore, a key steelmaking ingredient, will slow to single digit growth, but the country's annual steel output will still rise by some 60 percent by 2025, Ashby said.

The news knocked the Australian dollar down 1 percent and weighed on stocks in Asia and Europe. Markets are very sensitive to any hint of softening demand in China, given it is Australia's single biggest export market.

China's iron ore imports have grown at a double-digit rate for the last eight years, apart from a 1.4 percent drop in 2010 amid the global financial crisis, according to data from Reuters and China customs.

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Graphic on BHP production: http://link.reuters.com/tux95s

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Chinese demand for iron ore has been the driving force behind years of expansion work by the world's biggest miners. More than 100 million rural Chinese are projected to settle in towns and cities in the next decade, requiring vast amounts of steel for housing and infrastructure.

Earlier this month, however, China cut its 2012 growth target to an eight-year low of 7.5 percent, fuelling caution about demand for natural resources.

The miners stopped well short of declaring an end to China's commodities boom, but dimmed their outlooks.

EXPANSION PLANS

Rio, BHP and other miners have been pursuing a strategy of running at full production and expanding capacity in long-life and relatively low-cost commodity assets compared to the selling price of ore, banking on squeezing out higher cost producers.

When the industry shakes out, you need to be on the left hand (lower) side of the cost curve, BHP's Ashby said.

BHP was sticking with its $10 billion iron ore expansion plan and was mining ore at a rate of 165 million to 170 million tonnes per year, Ashby said.

That is above its production guidance of 159 million tonnes in fiscal 2012 ending June 30, maintaining the company's No.3 global ranking in iron ore behind Vale and Rio Tinto.

The size of the pie is really big, so any percentage increase is a significant number, Ashby said.

Analysts agreed even single-digit growth in Chinese ore demand should be enough to spur miners to push ahead with production expansion plans. Certainly the rate of growth in Chinese demand is slowing, but the growth is from an ever increasing base so the number of iron units required continues to rise, said Paul Gray, analyst at Wood Mackenzie, who sees the seaborne iron ore market staying tight through 2012 and 2013.

Rio was also sanguine about the slowing growth.

Although the rate of GDP growth in China is more immediately slowing, we remain confident, on the basis of the figures we have seen, of a soft landing, with solid growth for this year, David Joyce, Rio Tinto's managing director of expansion projects, said in a speech. Imported iron ore inventories are in decline at major ports in China after exceeding 100 million tonnes in early February, consistent with a rebound of the steel market, according to Australia & New Zealand Bank's Nicholas Zhu.

High levels of stock have been a concern since last November when the steel market entered a period of slow activity, Zhu said in a client note.

BHP saw the current floor for global iron ore prices at $120 a tonne, based on the estimated highest cost of production inside China, Ashby said. Iron ore has sold for between $130 and $147 a tonne over the last four months, which mega-producers such as Rio Tinto have said is high enough to warrant investment in new mines. Rio has mapped out plans to lift annual production of iron ore in Australia to 283 million tonnes in 2013 from 225 million now by digging new mines and expanding existing ones. Rio Tinto Chief Executive Tom Albanese told the company's annual meeting last month it would stage expansion work with market conditions.

Global iron ore demand is set to double to around 3.5 billion tonnes a year by 2030, with Chinese appetite for ore material continuing to drive the market, albeit at a slower pace, according to Perth-based Intierra Resource Intelligence. BHP shares eased 0.1 percent in Australian trade, but its London listing fell more than 2 percent in early trade.

(Additional reporting by Victoria Thieberger in Melbourne and Manolo Serapio Jr in Singapore; Editing by Lincoln Feast, Clarence Fernandez and Ed Davies)

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