Chinalco, state-owned Chinese metals giant, is in a strange position with its entire nine per cent stake in mining major Rio Tinto frozen by the administrators of Lehman Brothers, the custodian of its Rio shares.

Chinaco said it was in discussions with PriceWaterhouseCoopers for the transfer of shares, which constitute its nine per cent stake in Rio Tinto.

The Lehman administrators have frozen all of the failed brokerage's assets, including the 12 per cent stake that Chinalco and Alcoa jointly own in Rio Tinto.

Chinalco, which bought the 12 per cent stake along with Alcoa for around £7.1 billion in February, saw its value hammered by almost £5 billion since then. The 12 per cent stake is now worth £2.4 billion.

Chinalco bought into Rio to have a say in mining giant BHP Billiton's hostile bid for its smaller rival. 

The development comes towards the end of a five-year commodities boom that triggered a global sell-off in equities in resources, minerals and commodities amidst a price boom.

Chinalco said it was in discussions with the Lehman administrators about ''an orderly transfer of the shares,'' adding, it was not in danger of losing its stake in Rio as part of Lehman's liquidation.

Chinalco also said there was no valid basis on which its ownership of the Rio Tinto shares could be challenged and these shares could in no way form part of the general assets of Lehman Brothers International Europe.

As things stand, it may take months for PwC to sort out the complex claims and counter claims on assets that have been frozen in Lehman accounts, and PwC partner Steven Pearson was on record saying that the assets would not be distributed according to "who shouts the loudest".

Beijing, however, has made it clear it wants to the assets returned as soon as possible.

Chinalco's difficulties are likely to complicate a possible deal between BHP and Rio as the share transfers might not come in time for them to be returned to Chinalco to make a decision on the deal.

Rio Tinto has warned that demand for commodities from China is slowing and the company's chief executive Tom Albanese has said the recent global financial turmoil had forced Rio Tinto to reconsider its divestment strategy.

''The long fore-shadowed deceleration in economic activity has resulted in a marked reduction in Chinese commodity demand growth from the overheated levels we saw in 2007,'' Albanese said.

''In the near term, the Chinese economy is pausing for breath.''

This downturn is likely to be more severe in the United States and OECD countries, although emerging Asian economies such as China and India are more resilient because of a domestic demand-led growth

China, however, may not be completely insulated from the current slump in OECD economies as a recession would have an adverse impact on China's exports.

China's demand for crude oil, iron ore, copper and aluminium have already slowed.

Although Australia's major raw material exports are yet unaffected, Rio Tinto plans to divest $10 billion in assets by the end of the year.

In fact, a rising US dollar has been a saving grace for the minerals industry in Australia whose currency has been falling against the US currency.

Mining stocks were hammered on Thursday as a panic-stricken market reacted to Rio Tinto's plans to delay some development projects until market conditions improved.

The news also hit other mining and metals groups like aluminium producer Alcoa and copper miner Freeport McMoran.