Rio Tinto's postponement of its $10 billion asset divestment programme is understandable in the current environment. Raising several billion dollars to buy a coal mine at a time of tight credit and tumbling commodity prices is a tall order.

However, the postponement will weigh heavily on the company's prospects in the coming year. It took on $40 billon of debt to buy Alcan at the top of the market last year and needed the $10 billion divestment to reduce that burden. Entering a downturn with enormous quantities of debt is never an attractive proposition. Demand for metals in the West has fallen steeply and even China, which has driven the commodities boom of recent years, is slowing. For most of this year, Rio has banked on strong Chinese demand to offset falls in the West but the company was forced today to admit that its largest customer is taking a breather.

Meanwhile, Rio has committed itself to a large increase in the production of commodities such as iron ore. Tom Albanese, the chief executive of Rio, therefore has to deal with increased supply, falling demand and metal prices and high debt - a terrible combination.

Another impact of a weakening in Mr Albanese's position may be that it strengthens that of BHP Billiton, which is offering to buy Rio in a deal worth about $120 billion. European competition regulators will still have the largest say in whether that deal goes ahead but Rio's statement today tilts the advantage towards BHP for the first time in a year.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax