Credit not steel, China's new use of iron ore props up demand
* Financing deals helped China's iron ore imports, stocks hit records
* China is tightening credit to sectors with overcapacity including steel
* Commodities such as copper and rubber commonly used for financing
By Manolo Serapio Jr
SINGAPORE, Feb 18 (Reuters) - Chinese steel mills and traders are buying more iron ore to use as collateral to secure loans, helping imports and stocks of the raw material defy expectations for a slowdown in demand by the world's biggest consumer.
The increasing use of iron ore for financing explains why China is maintaining its voracious appetite even as a slowing economy threatens to curb demand for steel.
Commodities such as copper and rubber have been commonly used for financing in China, but Beijing's tightening of lending in sectors plagued by overcapacity such as steel has made it harder to secure bank loans, spurring financing demand for iron ore, according to industry sources familiar with the practice.
Robust Chinese imports are supporting prices and underpinning expansion plans at top miners such as Vale , Rio Tinto and BHP Billiton .
But there is also a risk that Beijing could crack down on the practice and take out a big chunk of demand rapidly. Continuación...