More reports on the developing Rio-China iron ore story.
Beijing reports have claimed for the second time in a week that major Chinese steelmakers have accepted a temporary 33% price cut from Rio and may allow annual contract talks to lapse.
Quoting the Umetal Research Institute, western agencies such as Bloomberg reported that there may be no official announcement about the price agreement.
A similar report was around last week, but there was no confirmation from either side.
Prime Minister Rudd made it clear yesterday that he had raised the issue well before the Federal Opposition started making noises about it, and he said that he had received more information that was in the public arena on the situation.
And there were claims made in a Chinese newspaper that Rio paid bribes to senior executives at a number of Chinese steel mills during negotiations.
The well-connected China Daily claimed in a report on its website that corruption was "widespread" in the steel industry, without citing sources.
These claims can’t be checked or verified in any independent way.
The Financial Times and a couple of industry newsletters have pointed out that China’s steel industry is being forced to pay sharply higher spot prices for iron ore as mills scramble for imports ahead of restrictions expected to flow from the Rio inquiry.
Steel Business Briefing, a consultancy in Shanghai, said a sudden rise in Indian iron ore prices, to almost $US90 a tonne, was triggered by supply constraints as Australian miners cut spot shipments to China, while Chinese mills rush to buy amid reports that as many as 20 iron ore import licences will be cancelled (Source, FT).
Contract prices under the new contracts with the Japanese, South Korean and Taiwanese steel mills call for an average price of around $US62 a tonne. That excludes freight.
The spot market has been trading above that for the past month as Chinese companies have continued to stockpile iron ore.
Shipments are up 29% in the first six months of the year and a record 57 million tonnes was imported in April, and around 3% less was imported last month.
Rio has denied cutting exports.
The settlement rumours would mean that the China Iron and Steel Association, has abandoned its demand for price cuts of up to 45% for fines. (The Japanese received that price for their favoured type of ore called lump.)
And another clue: Reuters and steel industry newsletters in China and websites say that Baosteel will raise prices of its major steel products by 9% to 13% next month, which is more than expected.
The move is seen by some analysts as suggesting that the steel mills have given up their battle for to cut iron ore prices.
Chinese authorities have said they have evidence that Rio employees, including Stern Hu, an Australian citizen and head of Rio’s iron ore operations in China, stole state secrets.
China is accusing Hu of bribing steel executives during iron ore price talks, according to Foreign Minister Stephen Smith.
Bloomberg reported last week that Hebei Iron & Steel Group, China’s second-biggest mill by output, accepted the provisional cut while the talks were continuing.
According to London Metal Bulletin prices, the price of iron ore for immediate delivery to China rose 5.5% to $US87 a tonne last week.
This includes freight costs of around $US13-$US14 a tonne.
The China Daily newspaper reported today that executives from 16 Chinese steel mills taking part in iron ore talks this year received payments from Rio employees, citing an industry “insider” it didn’t identify.
"Executives from five leading domestic steel makers and officials from the industry association are reportedly under investigation following last week’s detention of four employees of Rio Tinto’s China operation, including an Australian.
"Rio Tinto got to know the key executives of the 16 steel mills, who have sensitive industry information, when the China Iron and Steel Association (CISA) brought them to the bargaining table," said a senior manager at a large steel company, who requested anonymity," China Daily claimed.
And the China Daily reported that the very well informed 21st Century Business Herald, which last week carried news of the arrest of the four Rio officials and details of their charges before any official confirmation, said today that a Laiwu Iron & Steel Group’s shipping executive was “taken away” by authorities on suspicion of providing information to Rio’s employees including Hu.
""It is very likely for CISA to cancel about 20 iron ore import licenses held by steel makers and trading companies, with a focus on trading companies," the 21st Century Business Herald reported, citing an anonymous source."
Rio had relocated mid-level and junior expatriate staff from its Shanghai office to Hong Kong and Singapore before the arrest and detention of Hu, the Australian Financial Review reported yesterday.
Rio employees had previously told Australian media they feared their phones were being tapped in Shanghai.
