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July 14, 2009
China Widens Investigation of Steel Industry
By DAVID BARBOZA
SHANGHAI — The Chinese authorities have detained or questioned at least seven Chinese steel industry executives in a broadening corruption investigation connected to the detentions last week of four employees of the mining giant Rio Tinto, the state-controlled news media reported Monday.
The investigation, which began with accusations that the four Rio Tinto workers had conspired to steal state secrets, has rapidly widened, according to accounts on government Web sites and Chinese news media.
It now includes accusations of widespread bribery in business dealings, as well as allegations that the four workers paid for detailed government trade and manufacturing data to give Rio Tinto executives an edge in iron-ore negotiations with Chinese state-controlled steelmakers.
The reports said that senior managers at five steel factories were giving the authorities information. Those being questioned include shippers, traders and steel-mill managers. A week ago, an executive at Shougang Steel in Beijing, one of the country’s biggest steelmakers, was detained.
“The whole industry is in a state of shock at the moment,” says Paul Bartholomew, an analyst based in Shanghai who writes for Steel Business Briefing. “There’s a sense of fear. ‘Don’t talk to us,’ or ‘Who’s going to get tapped on the shoulder next?’ ”
Rio Tinto officials declined comment Monday. A spokesman for the China Steel & Iron Association, which represents a large number of Chinese steel mills, was unavailable for comment.
Experts on China’s large steel and iron ore industry say an array of corrupt practices have gone on for years, including iron ore deals off the books and the exchange of confidential market data that Beijing now considers state secrets.
Analysts and industry officials, many of whom asked not to be identified Monday because of fear of upsetting Beijing, say the steel industry is rife with rumors and worries that a wave of arrests and detentions could come in the coming weeks, just as the steel industry is beginning to recover from a sharp slowdown.
“There’s a large gray area out there,” one industry official, who asked not to be named, said in a telephone interview Monday. “We entertain officials all the time. Is that considered a bribe?”
People working for American companies and most European companies are barred from entertaining government officials or buying them gifts to influence their decision-making .by anticorruption statutes.
Initially, Australian officials suggested the arrests of the employees of Rio Tinto, an Anglo-Australian company, were retaliations for a pair of soured business deals in China. Last month, Rio Tinto scuttled a planned $19.5 billion deal with a Chinese company, Chinalco.
Then focus shifted to Rio Tinto’s part in negotiations between iron ore suppliers and Chinese steel mills over ore prices. The talks failed to yield a long-term contract, which could force the mills to pay higher prices this year.
China is the world’s largest producer of steel; Rio Tinto is one of its biggest suppliers of a main ingredient, iron ore.
http://www.nytimes.com/2009/07/14/wo...otinto.html?hp
The investigation, which began with accusations that the four Rio Tinto workers had conspired to steal state secrets, has rapidly widened, according to accounts on government Web sites and Chinese news media.
It now includes accusations of widespread bribery in business dealings, as well as allegations that the four workers paid for detailed government trade and manufacturing data to give Rio Tinto executives an edge in iron-ore negotiations with Chinese state-controlled steelmakers.
The reports said that senior managers at five steel factories were giving the authorities information. Those being questioned include shippers, traders and steel-mill managers. A week ago, an executive at Shougang Steel in Beijing, one of the country’s biggest steelmakers, was detained.
“The whole industry is in a state of shock at the moment,” says Paul Bartholomew, an analyst based in Shanghai who writes for Steel Business Briefing. “There’s a sense of fear. ‘Don’t talk to us,’ or ‘Who’s going to get tapped on the shoulder next?’ ”
Rio Tinto officials declined comment Monday. A spokesman for the China Steel & Iron Association, which represents a large number of Chinese steel mills, was unavailable for comment.
Experts on China’s large steel and iron ore industry say an array of corrupt practices have gone on for years, including iron ore deals off the books and the exchange of confidential market data that Beijing now considers state secrets.
Analysts and industry officials, many of whom asked not to be identified Monday because of fear of upsetting Beijing, say the steel industry is rife with rumors and worries that a wave of arrests and detentions could come in the coming weeks, just as the steel industry is beginning to recover from a sharp slowdown.
“There’s a large gray area out there,” one industry official, who asked not to be named, said in a telephone interview Monday. “We entertain officials all the time. Is that considered a bribe?”
People working for American companies and most European companies are barred from entertaining government officials or buying them gifts to influence their decision-making .by anticorruption statutes.
Initially, Australian officials suggested the arrests of the employees of Rio Tinto, an Anglo-Australian company, were retaliations for a pair of soured business deals in China. Last month, Rio Tinto scuttled a planned $19.5 billion deal with a Chinese company, Chinalco.
Then focus shifted to Rio Tinto’s part in negotiations between iron ore suppliers and Chinese steel mills over ore prices. The talks failed to yield a long-term contract, which could force the mills to pay higher prices this year.
China is the world’s largest producer of steel; Rio Tinto is one of its biggest suppliers of a main ingredient, iron ore.
http://www.nytimes.com/2009/07/14/wo...otinto.html?hp