Rio Tinto
China's iron ore probe widens; Australia wants haste
Chinese investigators have questioned executives at several steel mills in a widening probe of alleged leaks of state secrets to the world's second-largest iron ore miner Rio Tinto, steel officials and Chinese media said on Tuesday.
From Canberra, Australian officials said they were still seeking information about the detention of a Australian Rio executive on spying accusations in a case that has cast a shadow over bilateral trade worth $53 billion last year.
The broadening investigation targets some of China's largest mills, all influential members of the China Iron and Steel Association (CISA), which represents the country's industry in annual negotiations with global iron ore miners.
That could increase tensions between CISA and the steel mills, many of which are impatient with the association for so far failing to reach a new price settlement for 2009 with miners Rio, BHP Billiton and Brazil's Vale.
The Shanghai State Security Bureau earlier this month detained Stern Hu, Rio's iron ore salesman in Shanghai, and three of his Chinese colleagues, alleging they "pried and stole" state secrets. Rio has said little about the case.
"Australian officials will continue to press Chinese authorities for further detail on the reasons for Mr Hu's detention and reiterate Australia's view that his case should be handled expeditiously," Treasurer Wayne Swan said in Canberra.
The investigation has left iron ore talks in limbo, and could reflect a rift between mills which want to settle on a term price to ensure normal supply, and CISA, which wants to centralize control over the fragmented and intensely competitive industry.
Uncertainty over what information should now be considered "secret" has also unnerved the industry and foreign investors.
A Foreign Ministry spokesman said Beijing was not trying to make life difficult for foreign companies, which have poured into China in the past decade to tap into the rapid growth that has transformed the country into the world's third-largest economy.
"The Chinese government protects the legal rights of foreign firms, in accordance with the law," spokesman Qin Gang said.
"At the same time, foreign firms have the responsibility and obligation to respect Chinese laws and rules."
Qin said a media report that Chinese president Hu Jintao had signed off on the detentions "did not accord with the facts."
SECRETS, AND A RIFT
Investigations have touched flagship Baosteel Group, as well as Anshan Iron and Steel Group (Angang), its partner Benxi Iron and Steel Group, Shandong-based Laiwu Iron and Steel Group and Jinan Iron and Steel Group, the China Daily said.
The alleged secrets relate to CISA's negotiating stance as well as commercially sensitive information such as mill production plans, iron ore stock levels and import information.
"This is a case involving foreign companies, and isn't a small matter," CISA secretary general Shan Shanghua told the 21st Century Business Herald.
Meanwhile, CISA and the Ministry of Commerce are reviewing iron ore import licenses to identify speculative importers, and are likely to cut about 20 licenses, most belonging to trading firms. Similar reviews have been conducted in previous years, when spot ore imports spiked during annual talks.
CISA took over from Baosteel as the lead negotiator in this year's round of talks, but failed to reach an agreement by a June 30 deadline as it attempted to get a better deal than a 33 percent cut agreed to by Japanese and South Korean rivals.
Many of the mills and trading companies were prepared to sign on the same terms as their Asian rivals, confident the traditional system whereby all mills accept the initial settlement meant they were not at a disadvantage, said a Chinese analyst, declining to be named given the ongoing investigations.
A senior official at Shougang Group, China's eighth-largest mill, was detained last week for allegedly leaking information. He was a member of the Chinese negotiating team, sources said.
The 21st Century Business Herald reported that Baosteel officials, including those involved in negotiating previous rounds of talks, had returned to work after being questioned.
A Laiwu official confirmed that some company officials had been asked by police to assist in investigations, but could not say how they were related to the case. Officials at the other mills could not be immediately reached for comment.
(Published by Reuters - July 14, 2009)