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Mining, retail lift NAB business conditions

Forex-Master — Tue, 13 Dec 2011 09:49:04 +0000

Business conditions improved slightly in November, thanks to a boost in mining, retail and services sectors, a private survey has found.

National Australia Bank’s monthly business survey showed the business conditions index up by one point, to plus one index point, in November, after softening in…
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Published: Tue, 13 Dec 2011 10:49

High Hopes For Metals – US-FOREX.US

Forex-Publisher — Thu, 20 Aug 2009 03:14:24 +0000

While recent pullbacks across raw materials may stoke fears of the bubble bursting, commodities bulls are undeterred. Inventories, after all, are extremely low and will have to be replenished once demand improves. Until then, volatility is just part of the game.Fears that China’s inventory build is over and that the economic recovery won’t be as robust may pressure prices of industrial metals in the near-term, but the sector’s long-term growth prospects remain promising. Thus far, China has been a main driver behind metals price growth but, according to Barclays Capital analyst Kevin Norrish, “the potential still exists for a significant boost to global metals consumption over the coming months as the industrialized work manufacturing sector recovers from double-digit declines registered in the first half of 2009.”The firm hiked its price forecasts for the metals on Wednesday, citing expectations for demand among developed countries that will be swifter than the market is anticipating. “We expect metal inventories to be rundown through the second half of 2009 with the recovery in OECD demand likely to be sharp and strong,” said analyst Gayle Berry. On Wednesday, the Materials SPDR
exchange-traded fund closed ahead by 35 cents, or 1.2%, at 29.44; and the SPDR S&P Metals and Mining
ETF closed up by 22 cents, or 0.6%, at 40.17. Year-to-date, the funds have gained nearly 30% and 45%, respectively.

Iron Ore Ships As Steel Shapes Up – US-FOREX.US

Forex-Publisher — Fri, 14 Aug 2009 23:50:18 +0000

Concerns about speculative buying continues to temper optimism regarding strengthening base metal prices as the market seeks to differentiate real metal demand from stockpiling and other conjectural buying. According to a recent report, one sector boasting solid demand is steel.Metal demand from China during the first half of the year bolstered steel demand, likely accounting for 60% to 85% of sales, estimates Tony Rizzuto, an analyst and managing director at Dahlman Rose & Co. He is one of the authors of the firm’s recent “Iron Ore, Steel and Dry Bulk Review” that highlights the Chinese government’s efforts to deflate speculative bubbles while maintaining steady growth by encouraging banks to lower lending. According to the review, steel and iron ore will continue to trend higher, supported by strong consumption. Automobile and construction industries account for the bulk of Chinese steel consumption. Auto sales have been rising in China as its economy grows even as the world remains in recession and in the U.S., thanks to the government’s Cash for Clunkers program. For a read on construction demand, report authors Rizzuto and Omar Nokta, an analyst and head of research at Dahlman Rose, looked to cement production. Cement is a good indication of rebar consumption and unlike most base metals, it isn’t easy to stockpile massive amounts of cement. Therefore, increased cement production indicates a pickup in construction activity and bolstered steel demand. Chinese steel trends suggest stronger iron ore consumption both from China and other global markets that have seen blast furnace restarts such as South Korea, Japan and Europe. Since these markets also depend on the seaborne market for iron ore, bulk dry freight demand is also strengthening. Rizzuto and Nokta estimate that China will import 518.4 metric tons of iron ore from the seaborne market, up from their prior projection for imports of 448.3 million tons. Companies poised to benefit from these trends, according to the report, include ArcelorMittal
, BHP Billiton
and Steel Dynamics
in metals and mining; and Diana Shipping
, Genco Shipping & Trading Limited
and Navios Maritime Holdings
in the dry bulk sector.

BHPs Upturn Plans – US-FOREX.US

Forex-Publisher — Wed, 12 Aug 2009 21:46:28 +0000

Cost consciousness is paying off at BHP Billiton. While the mining industry is still licking the wounds from an up to 90% tumble in some metal prices and faltering growth in commodity-gobbling China, the Anglo-Aussie company is keeping its eyes peeled for acquisition opportunities.
While investment in forthcoming projects would be its priority, “we do look at M&A opportunities,” Chief Executive Marius Kloppers told Forbes. Petroleum – a rapidly expanding and cheap to produce business for BHP – would be one of the areas that they’d consider, he added.
Profits at the Anglo-Australian firm fell during the year ending in June by 61%, but the fall was smaller than had been expected and there were a number of other positive signs. Topping the list for analysts was operating cash flow, the amount of cash generated from a company’s operations, and a closely watched measure of profitability. While the drop in commodity prices eroded cash flows at many mining companies-Switzerland’s Xstrata, for example, saw its first-half-year figure slide 73%-at BHP Billiton
, operating cash flow rose by 5.6% to 18.9 billion, suggesting that the firm’s cost-cutting strategy was having the desired effect. The company’s pretax, pre-interest profit margin came in at 40.6%, a decline from the year before but still well above the rest of the industry. “The numbers were very positive in our view,” says Gabor Vogel, an analyst at DZ Bank in Frankfurt who rates the stock as the “top pick” within the mining sector. “With these figures and having paid out a dividend [17% above last year], they are showing they have a certain financial strength,” he added. Shares of BHP Billiton rose 1.9% in London on Wednesday. One reason for investors’ lack of alacrity is that the firm is remaining cautious in its outlook. Kloppers told Forbes that the market won’t see clear sustained growth until the first quarter of next year. BHP has attributed part of the surge in demand for commodities earlier in the year to Chinese firms that were restocking supplies, but he has also warned that this is at its tail end. However, that economic weakness may end up being a blessing for BHP. The firm has been positioning itself at the bottom end of the cost curve, focusing on low-cost commodities and projects where there is more slack when selling prices tumble. For example, five of the seven projects completed in the past six months were petroleum projects, which cost it around 6 a barrel to produce. The firm has several billions’ worth of further petroleum projects in the pipeline too, along with aluminum, iron ore and coal. According to Charles Kernot, an analyst at Evolution Securities, the large number of low-cost projects such as iron ore and petroleum that came live during the period contributed to the cash flow rise. BHP’s cost control should also benefit from its plans announced in June to pool its iron ore operations in Australia with Rio Tinto
. That plan took shape after Rio Tinto, under pressure in Australia, ditched a proposed investment from Chinese aluminum producer, Chinalco. Since then, Rio’s relations with China have deteriorated rapidly: late on Tuesday, Chinese authorities finally arrested four employees for trade-secret infringement and bribery. BHP has been lying low in the dispute: During a conference call, Kloppers told investors the firm was monitoring the situation but operating as usual in China.

BHPReady For The Upturn – US-FOREX.US

Forex-Publisher — Wed, 12 Aug 2009 14:46:41 +0000

The past twelve months were never going to be pleasant for miners, with spot prices for metals falling by up to 90%, and commodity-gobbler China witnessing faltering economic growth this year, but all in all, BHP Billiton seems to have coped as well as it could have under the circumstances.Profits at the Anglo Australian firm fell during the year ending in June by 61%, but the fall was smaller than had been expected and there were a number of other positive signs. Topping the list for analysts was operating cash flow, the amount of cash generated from a companies’ operations, and a closely-watched measure of profitability. While the drop in commodity prices eroded cash flows at many mining companies – Switzerland’s Xstrata, for example, saw its first half-year figure slide 73% – at BHP Billiton, operating cash flow rose by 5.6% to 18.9 billion, suggesting that the firm’s cost cutting strategy was having the desired effect. The company’s pre-tax, pre-interest profit margin came in at 40.6%, a decline from the year before but still well above the rest of the industry. . “The numbers were very positive in our view,” says Gabor Vogel, an analyst at DZ Bank in Frankfurt who rates the stock as the “top pick” within the mining sector. “With these figures and having paid out a dividend [17% above last year] they are showing they have a certain financial strength,” he added. Shares of BHP Billiton
were up 0.5%, to 15.34 pounds , in London midday trading. One reason for investors’ lack of alacrity is that the firm is remaining cautious in its outlook. Marius Kloppers, chief executive of BHP, has attributed part of the surge in demand for commodities earlier in the year to Chinese firms that were re-stocking supplies, but he has also warned that that this is at its tail end. While North America and Europe may compensate somewhat, any assumption of a quick return to historical trend growth in the wider economy “may be premature,” the firm warned on Wednesday.However, that economic weakness may end up being a blessing for BHP. The firm has been positioning itself at the bottom end of the cost curve, focusing on low-cost commodities and projects where there is more slack when selling prices tumble. For example, the firm has spent 3 billion of a total capital expenditure of 4 billion on developing petroleum projects, which cost it around 6 a barrel to produce. The firm has several billions’ worth of further petroleum projects in the pipeline too, along with aluminum, iron ore and coal.
BHP’s cost control should also benefit from its plans announced in June to pool its iron ore operations in Australia with Rio Tinto. That plan took shape after Rio Tinto, under pressure in Australia, ditched a proposed investment from Chinese aluminum producer, Chinalco. Since then, Rio’s relations with China have deteriorated rapidly: late on Tuesday, Chinese authorities finally arrested four employees for trade secret infringement and bribery. BHP has been lying low in the dispute: during a conference call Kloppers told investors the firm was monitoring the situation but operating as usual in China.

China Finally Arrests Rio Workers – US-FOREX.US

Forex-Publisher — Wed, 12 Aug 2009 10:47:20 +0000

HONG KONG -
Rio Tinto’s bribery drama reached a new climax when China formally – and finally – arrested four employees of the Australian mining giant on Wednesday. But there are signs that China is beginning to play down the matter by charging the four with less serious crimes than expected, perhaps over fears that China’s sovereign fund, along with thousands of state-owned companies, might otherwise be unwelcome in overseas markets in the future.
After six weeks of detention without charges, Rio Tinto
’s chief iron ore negotiator Stern Hu, an Australian Chinese, and his three co-workers based in Shanghai, were arrested late Tuesday over trade secrets infringement and bribery. The formal arrests came shortly after Hu received his second consular visit from Australian officials.
State media Xinhua reported Wednesday that preliminary investigations found the four Rio Tinto employees, including Hu, general manager of the company’s Shanghai office in charge of the iron ore business, and three of his Chinese co-workers Liu Caikui, Ge Minqiang and Wang Yong, had obtained commercial secrets about China’s steel and iron industry through improper means, which had violated the country’s criminal law.
Prosecution authorities found evidence to prove that they were involved in commercial bribery, and investigations have also revealed that employees of Chinaese steel and iron companies were providing commercial secrets for them, Xinhua added, citing a statement from China’s Supreme People’s Procuratorate.
Nevertheless, the suspects were not charged for stealing state secrets as Chinese media has been widely reported since the four were detained on July 5.
Amanda Buckley, Rio Tinto’s spokeswoman in Australia, said the company had not received official confirmation of the arrest and charges.
Australia’s Department of Foreign Affairs also said in a statement that the government was only aware of the arrest through media reports, and had not yet been formally notified by the Chinese authorities about the charges.Chinese officials portrayed the arrests as a sign of China’s determination to create a competitive, open and fair market environment in the country.
China’s deputy commerce minister, Fu Ziying, stressed that the Rio Tinto case was an isolated one, “We believe Chinese judicial organs will make a fair ruling on the case based on the facts and in accordance with law. There is no question about that,” Fu told a news conference in Beijing, adding the charges should not affect relations with Australia. “This will not hurt China’s efforts in terms of attracting foreign direct investment. On the contrary, we believe this will benefit China’s attraction of foreign direct investment,” Fu said.
According to Chinese media reports, Rio Tinto’s employees were charged under Article 219 of China’s criminal law, which states that whoever obtains business secrets by stealing, luring, coercion or any other illegitimate means and thus brings significant losses, “shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention and shall also, or shall only, be fined; if the consequences are especially serious, he shall be sentenced to fixed-term.”
The penalty for stealing business secrets is much lighter than the maximum penalty of stealing state secrets, which could be life imprisonment.
Indeed since the day Hu and his colleagues were taken away by Beijing authorities, Chinese media have repeatedly reported that Rio Tinto might have stolen information classified as state secrets during the iron ore contract negotiations.
According to China’s Law of Guarding State Secrets, which came into force in 1989, the scope of state secrets is broadly defined. It includes secrets in national economic and social development, and other matters that are classified as state secrets by the state secret-guarding department. In other words, China could legitimately pursue Rio Tinto’s representatives on those very serious charges.
Some say China may be lowering the stakes with the lesser charges to avod scaring away potential investors and so that foreign governments will still welcome future Chinese investment overseas.Professor Larry Catá Backer of The Dickinson School of Law at Penn State University wrote that if China charged Rio’s employees with stealing state secrets, it would have a deep impact on the country. “What makes the case interesting is the conflation of a state and market activities,” Professor Backer wrote in an article on the matter.
“When the state is participant in private market activities, actions that might be considered good or bad business practice can be transformed from economic to political criminality. The stakes become much higher for private market participants, but only in their interactions with states as private actors in markets,” he wrote.
Backer, an expert on constitutional, corporate, and transnational law, warned, “When the character of commercial activity, even wrongly activity, changes character from an economic to a political crime, the distinction between private and public spheres is more likely to collapses.”
“And that may be true enough-the actions were not directed against the state, as sovereign. But it does appear that the activity was intended to advantage Rio Tinto in its dealings with competitor enterprises in markets that touched on Chinese state economic policies affecting enterprises controlled by the state. That had the effect of transforming competitive market activity into anti state activities. That is certainly how the Chinese officially saw it.”
China has repeatedly emphasized the Rio Tinto case was just one individual judicial case that should not affect overall China-Australia economic and trade cooperation.
Yet, Backer expected that Rio Tinto dispute might well produce collateral effects-from creating suspicion about the integrity of markets, to the inability of the Chinese state apparatus to convince others that its enterprises are not public interventions in otherwise private markets.“But that sort of conflation of public and private activity-projection of political power abroad indirectly through private state owned enterprises to mask for the purposes of executing political goals also tends to affect perceptions of the integrity of markets. And it can produce reciprocal action, all to the detriment of the private in economic activity. This has been the great fear of sovereign wealth fund activity. But it seems that the greater danger might well come from the investment activities of state owned enterprises acting as surrogates for the state,” the scholar concluded in his article titled State Owned Enterprises and the Integrity of Private Markets and Commercial Activity on the Arrest of the Rio Tinto Executive.
The Associated Press and Thomson Financial contributed to this article.

3 Billion Barometer Of Trade Tensions – US-FOREX.US

Forex-Publisher — Tue, 11 Aug 2009 08:46:20 +0000

HONG KONG -
China’s Yanzhou Coal appears set to announce a takeover bid to purchase Australian coal miner Felix Resources. The 3.1 billion deal would be China’s largest-ever acquisition in Australia and also a thermometer that measures the heat of the recent trade battle and diplomatic tensions between Beijing and Canberra.
Shares of Felix Resources
in Australia and the stocks of Yanzhou Coal
in both Hong Kong and Shanghai were suspended from trading for the second day on Tuesday. Felix Resources said Monday that an announcement was pending on the outcome of talks on a potential change of control transaction.
It is widely reported that both parties, which have been in talks on and off since last year, have finally reached the final stage for clinching a deal. The Australian newspaper reported that Yanzhou has offered about 18.00 Australian dollars cash per Felix share, while another paper, The Sydney Morning Herald, revealed a higher bidding price of just under than 20 Australian dollars a share, valuing the entire Felix Resources at as much as 3.7 billion Australian dollars .
According to market speculation, Yanzhou’s offering price would carry a premium ranges from 6.5% to 18.3% to Felix’s last closing price of 16.9 Australian dollars before the trading halt.
Felix’s chairman, Travers Duncan, managing director Brian Flannery, and non-executive director Hans Mende, hold a total stake of over 49% in Felix. If the three major shareholders all agreed to sell their shares, Yanzhou Coal could easily take control of the Australian miner.
The deal, however, is subject to approvals from both Felix’s shareholders and Australia’s Foreign Investment Review Board.
The Foreign Investment Review Board is responsible for providing a review and evaluating whether the investment is in line with the national interest. The Treasurer then makes the final decision.
On paper, the watchdog doesn’t really have strong reasons to block the deal as Felix Resources, which mostly exports coals to its major clients in South Korea and Japan, was never a major supplier at home in the Australian market, Credit Suisse
said in a research note. And Yanzhou Coal has already owned the Southland mine and didn’t have any problems from the government related to its previous coalmine purchases, said USB, another Another time.brokerage.
It the deal goes through, it would be China’s biggest overseas investment in Australia since last year, when another state-owned enterprise, Sinosteel, bought West Australian iron ore mining company Midwest Corporation Limited for 1.5 billion Australian dollars last year.
Yanzhou Coal, the fourth-largest coal producer in China. The share price of Yanzhou Coal has more than tripled from around 3.50 Hong Kong dollars in November last year to 12.7 Hong Kong dollars as of last Friday’s closing.
Felix Resources mainly produces higher-margin metallurgical coal, which is used in the production of steel, from its mines across the states of New South Wales and Queensland. The miner will soon start operation of its 80%-owned Moolarben project in New South Wales to supply thermal coal, the cheapest coal, which is mainly consumed by thermal power stations for use in the production of electricity. Expectations about a deal with a Chinese buyer have pushed up the market price of Felix Resources threefold, from 4.67 Australian dollars last December.
Yet, anything can happen now, because the political and economic tensions between China and Australia are heating up dramatically.
The tension began to build up in June when Rio Tinto
rejected Chinalco’s 19.5 billion bid to buy its major mining assets and convertible bonds at the last minute. Instead, Rio formed an iron ore and coal joint venture with its rival BHP Billiton
in Western Australia. Chinese commentators complained that the Australian miner acted immorally in its dealings with the Chinese firm, which was supposed to be a white knight saving the financially strained Rio.
Then Chinese steel mills, led by China Iron and Steel Association, used hardline negotiating tactics while discussing future iron ore contracts with Rio Tinto, which was a representative for other major miners.
Then four Shanghai-based Rio Tinto executives were detained by Chinese authorities for allegation of bribing Chinese steelmakers to obtain classified information about the Chinese steel sector during price negotiations.
In the latest episode, staged over the weekend, a former Chinese intelligence bureaucrat alleged that Rio Tinto had been spying on the Chinese steel industry for as long as six years, and used the information to make the Chinese steel sector overpay by 700 billion yuan for iron ore imported over the period.
Thomson Reuters contributed to this article.

Will Precious Metals Shine Through Recovery – US-FOREX.US

Forex-Publisher — Mon, 10 Aug 2009 21:46:25 +0000

Prices of both precious and industrial metals continued to climb during the second quarter, but with economic data gradually improving, sparking investors’ interest in recovery-related assets, precious metals could be losing their appeal. As economic indicators increasingly point to the early stages of a turnaround, investors shift from safe-haven-seeking mode to a recovery-minded approach.Gold and other precious metals pulled in the most commodity-related investments during the year’s first quarter, but inflows to precious metal exchange-traded products were only 800 million during the second-quarter, according to Barclays Capital analyst Suki Cooper. Energy and agriculture sectors were the second quarter’s stand-outs, grabbing 2.8 billion and 1.9 billion, respectively. Furthermore, redemptions of gold exchange-traded products were the second largest in July and inflows to the SPDR exchange-traded fund have stalled since the beginning of the month, said Barclays Capital analyst Natalya Naqvi, who noted that short-term speculative interest has held up and physical demand will likely emerge if gold’s price falls to around 900 an ounce. Lending support to gold’s investment appeal is the recent agreement to limit European central bank gold sales to 400 metric tons a year, reducing the bank’s sales quota by 100 metric tons a year. However, Barclay’s Naqvi notes that the new agreement should only be seen as mildly bullish for gold. Official sales under the current agreement remain low enough that sales could still increase under the new quota-even including the IMF’s intended sale of 403 metric tons of gold. Naqvi also expects gold mine supply to increase in 2009 but said any gains in supply would be offset by the reduction to official sales.On Tuesday, Vancouver Pan American Silver
is expected to report second-quarter earnings of 19 cents a share. During the first quarter, the company reported record gold production of 20,858 ounces-a 206% increase from last year’s first-quarter production. Silver production rose 8% to 4.9 million ounces.
Shares of mining companies closed Monday’s session’s broadly lower as gold futures slumped below the 950 level. Gold for December delivery trading on the Comex division of the New York Mercantile Exchange shed 12.60 to 946.90. The SPDR Gold Trust
exchange-traded fund closed Monday’s session down by 80 cents, or 0.9%, at 92.95. Pan American Silver’s stock shed 14 cents, or 0.7%, to 20.01, and shares of Hecla Mining
were 19 cents lower, or 5.7%, at 3.12. Silver Wheaton
lost 15 cents, or 1.5%, at 9.62 and Silver Standard Resources
was down by 1.09, or 5.5%, at 18.70.
Thomson Reuters contributed to this article.

Stake Sale Would Help Xstrata – US-FOREX.US

Forex-Publisher — Mon, 10 Aug 2009 13:46:25 +0000

Has Xstrata gone far enough to slash its debt burden? The copper-focused miner raised 5.9 billion from shareholders in March, most of which went towards paying down debt, but the company is still carrying a 13 billion debt pile in an uncertain trading environment. This could explain why Xstrata is currently considering asset sales to raise cash, as it also tries to woo Anglo American into a so-called “merger of equals” to save costs.Switzerland-based Xtrata
has received “expressions of interest” for a 70% stake in a Chilean mine called “El Morro,” which reports have valued at 700 million, but a spokeswoman for the company would not comment on Monday on whether they had been solicited or how they were received. She said that it would be “mistaken” to connect any deal with a desire to pay down debt, and that the company was comfortable with its current gearing levels of 28%.But Xstrata’s high debt position does remain “an issue,” according to Charles Kernot, an analyst with Evolution Securities. He cited debt concerns as a reason for his “reduce” recommendation on the stock, and said that the reported value of the stake-700 million-meant that an asset sale of that size would be a step in the right direction.Xstrata’s debt burden may also be the reason why it has not sweetened a rebuffed merger proposal with Anglo American. Xstrata proposed a 50-50 equity split in June, with expected annual synergies of 1 billion, even though Anglo American’s market capitalization is currently at 25 billion pounds , or around 1 billion pounds more than Xstrata’s.Shares of Xstrata sank 2.7%, or 22 pence , to 789.50 pence , during afternoon trading in London on Monday. Potential merger partner Anglo American
fell 1.7%, while rival BHP Billiton
lost 2.4%.Xstrata Chief Executive Mick Davis said earlier this month that the company had no significant refinancing requirements until 2011 and over 6 billion in existing credit facilities, but he still emphasized cost-cutting measures for the second half of the year. These included a “substantial” cut in capital expenditure on medium-to-long-term projects, and pushing managers to seek out “every opportunity” to drive down operating costs.

The Iron Ore War – US-FOREX.US

Forex-Publisher — Mon, 10 Aug 2009 06:46:18 +0000

HONG KONG -
China’s skirmish with Rio Tinto has escalated into an all-out war.First, the Anglo-Australian mining giant ruffled China’s feathers in June by scrapping a tie-up with China’s Chinalco. The Chinese miner was to pay 19.5 billion to buy Rio’s iron ore, copper and other assets, along with convertible bonds. Instead, Rio infuriated China by abruptly scrapping the Chinalco deal and tying up with archrival BHP Billiton. In early July, the deadline came and went during Rio Tinto’s negotiations with a group of Chinese steelmakers for setting a benchmark price for iron ore purchases. Rio refused to reduce prices as much as China demanded, leaving China to pay higher spot prices for ore.Days later, China detained four Rio Tinto employees in Shanghai and accused them of stealing state secrets. And on Sunday, Chinese state media claimed that Rio’s espionage had cost China 700 billion yuan by allowing Rio Tinto to manipulate the prices China paid for iron ore over at least six years.
Chinese state media directly affiliated with the State Secrets Bureau laid out the extraordinary accusations on a Chinese website on Sunday. The article said Rio Tinto had spied on China’s classified steel industry information for as long as six years, and urged China to take action to tighten its control of commercial information, signalling that more commercial espionage may soon be exposed.
In the article, Jiang Ruqin, the former director of the Huai’an State Secrets Bureau in Jiangsu province, urged the central authorities to deploy more staff to enforce China’s existing state secrets laws to protect sensitive commercial information from leaking out and tarnishing China’s national interests. In the past, Chinese state secrets laws have been used to punish human rights activists, lawyers and others China views as political threats.
Based on the recent Rio Tinto
case, Jiang said China must immediately define clearly what sort of commercial data constitutes a state secret amid rising commercial disputes and battles with China’s trading partners.
The article was published on www.baomi.org , the web site run by a state-level publishing house which has been printing national security related books and magazines. In it, the former intelligence and security head alleged Rio Tinto had used bribery and spying to collect a massive amount of information over the past six years, based on evidence found in a database on Rio Tinto’s computers. Jiang claimed that Rio Tinto had used the information to force the Chinese steel sector to pay 700 billion yuan more than the fair value of iron ore imported over the past six years. The excess amount is about double the total profit within Chinese steel sector during the same period. “It was like China had given the boss of these commercial spies a gift of 100 billion, approximately 10% of Australia’s GDP!” Jiang said.
The report marks the latest episode in the Sino-Australian iron ore trade drama that has poisoned relations between the two nations since early July, when four Rio Tinto employees based in Shanghai, including Chinese-born Australian executive Stern Hu, were detained by China’s Public Security Bureau on charges of bribing Chinese steel mill executives for sensitive price information during the iron ore contract negotiations between the China Iron & Steel Association and the Anglo-Australian miner.
Jiang stressed that the Rio Tinto case highlights how urgent it is for China to step up its surveillance on foreign trade representatives and how crucial it is for Chinese state-owned enterprises executives to safeguard commercial secrets. He added that the Chinese watchdog has been short-staffed, and focused purely on government organization for political and military security, leaving a loophole for foreign commercial spies and domestic traitors inside state-owned enterprises to take advantage. Jiang said that since 1997, economic intelligence has been within the purview of China’s National Secrets Protection Law.
China Daily also reported Monday that Rio Tinto staff had been bribing Chinese steel mill executives participating in iron ore price talks for years, so much so that the practice had become an unwritten market ritual.
China Daily quoted an unnamed senior director of a large Chinese steel company as saying: “The whole industry connived and winked at each other; that’s why bribery existed for many years but was only revealed now.”
Wenweipo, a pro-Beijing newspaper in Hong Kong, said Monday that Stern Hu, who is still being detained by the authorities, had also allegedly received a considerable amount in bribes from small and medium-sized steel mills for helping them obtain more import quotas from large Chinese steel giants. Citing unnamed sources, the Hong Kong paper said Hui owns several multi-million-dollar luxury resorts in China.