The Iron Ore War

Australia’s Rio Tinto (RTP) recently refused a US$19.5 billion offer from China-owned Chinalco. Rio Tinto not only rebuffed the offer, they then proceeded to form a production joint venture with BHP Billiton (BHP) for all of their iron ore assets in Western Australia.

Maybe it was a godfather offer?

Four Rio Tinto Employees Accused of Espionage:

The employees from Rio Tinto’s Shanghai sales office were accused of stealing government secrets. Three are part of the local sales team while one is an Australian national, Stern Hu, the general manager for the company’s China operations.

Iron ore price negotiations previously were conducted on an annual basis but rising costs and a near monopoly position (70% of global seaborne trade) by Rio Tinto Plc/BHP Billiton and Vale (VALE) have seen negotiations dragging out and more buying in the spot market.

Comments

[Spook:]

All news were only reporting about the arrest of Rio Tinto employees, yet Reuters reported "The head of the iron ore department with the foreign trade and investment unit of state-owned Chinese steel company Shougang Group has also been detained, newspaper reports and a Chinese steel industry executive said on Thursday."

So it seems that Rios employee in Shanghai was able to gain privilege information for them to walk away from a $19 billion deal and deal with BHP instead, as well as not giving in on the iron ore discount days before.

If this spying case prove to be true, Stern may be able to go back to Australia unharm, but the head of the iron ore in Shougang probably will be execute, and the future business relation between Australia and China may not be as cozy as before.

Jul 10 05:17 AM

[prastagus:]

seekingalpha.com/insta...

Stratfor found out what Rio did in between March when the deal was approved by Australia government to June when it fell through with Rio.

Jul 15 10:03 PM