Chinese traders are starting to default on contracts and the flow of new deals is easing as the country's appetite for raw materials slows dramatically.

Nations from India to Australia that had hoped robust Chinese demand would mitigate waning orders from the US and Europe are learning to live with significantly lower prices than they expected even a few months ago. Rio Tinto, the Anglo-Australian mining group, last week warned of a marked reduction in Chinese demand for commodities from the overheated levels of 2007. Iron ore, nickel and crude oil prices are all half of what they were in the middle of the year.

Although traders said that demand was weakening, they added that defaults and the drop in consumption were also due to difficulties in accessing credit for trade.