Two leading mining groups have scrapped multibillion-dollar projects to smelt aluminium in the Gulf and dig coal in Africa.

Dwindling industrial demand for metals has forced Anglo American and Rio Tinto to abandon plans set in stone only months ago.

Rio has effectively pulled out of a $10 billion (£6.4 billion) aluminium project in Saudi Arabia, reducing its role from joint investor to technology partner. The Anglo-Australian group's retreat will help it to preserve cash when it is weighed down with almost $40 billion in net borrowings.

Meanwhile, Anglo has halved its $9 billion capital budget, retreating from plans to produce more platinum, copper, iron ore and coking coal.

Cynthia Carroll, the chief executive of Anglo, said that she was taking action because of the fast-changing economic climate. The miner, which has extensive interests in South Africa, is capping its budget for 2009 at $4.5 billion by pushing back expansion plans.

Rio said that it would continue to work with Ma'aden, the Saudi Arabian mining company, to develop the aluminium project - a 740,000-tonne-a-year smelter that would use bauxite mined in the country - but its role would shift from joint equity partner to a technology co-operation agreement. Dick Evans, the chief executive of Rio Tinto Alcan, Rio's aluminium subsidiary, blamed the deteriorating market: “The crisis has changed Rio Tinto's outlook throughout the world.”

The Ma'aden aluminium project would have absorbed significant cash resources when Rio is straining under a heavy burden of borrowing incurred in part with the purchase of Alcan, the Canadian producer.

Last week, Rio said it would reduce spending on capital projects next year from $9 billion to $4 billion and cut 14,000 jobs. The company said that it was committed to reducing net borrowings, at present $39 billion, by a further $10 billion.

A sudden drop in demand from China for base metals has sent the global mining companies into a scramble to unravel expansion plans.

In addition, Anglo said yesterday that demand for platinum was being hit by falling car sales and the planned expansion of a copper mine in Chile and the commissioning of a nickel mine in Brazil are to be delayed.

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