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This post (China informs Australia that proof is irrefutable) from China News wrap is significant, as it's sourced locally from International Financial News, which is a Party owned newspaper.

Basically the Chinese authorities are not going to back off, having been snubbed over the Chinalco deal. I reckon this will run and be very detrimental for both Rio (NYSE:VALE) and BHP Billiton (NYSE:BHP). Anyone else noticed that both firms have been talking up inventories being built up elsewhere?

The real deal is in the second to last paragraph of the story :

At the same time, although Rio Tinto (RTP) had made statements last week emphasizing that it would ‘continue its iron-ore operations in China’, the actual situation does not seem to reflect this. The overseas media yesterday reported that shipments of spot market iron-ore from Brazil to China soared to record highs in July, which could be related to the Rio Tinto case. Australia seems to have temporarily suspended its exports of spot market iron-ore to China. Data from the shipping company AXSMarine indicates that orders for shipments to China from Australia’s main iron-ore port fell to 12 this month, while orders for shipments from Brazil reached the record high of 31. This means that China’s demand for iron ore is still strong.

Basically, VALE is picking up the slack and would also seem to be enjoying it too, if this piece from Reuters is anything to go by: Vale Resists China Price Cut Request on Demand Gain.

“Politically Vale has done well with its customers by letting the Australians settle first,” Cliff said. In the first quarter, China took 66.5 percent of Vale’s total iron-ore sales of 52.1 million metric tons, up from 32 percent a year earlier.

Long VALE is a no brainer, and I have felt that BHP is a little toppy for a week or so, so I may instigate a short. I'll leave RTP for bigger fish to swim with.

Source: China Piles Legal Pressure on Rio