Bloom: Rio Spying Cost China Mills $102 Billion, Agency Says (Update2)

[touchring]

This is getting intriguing, China might be cracking down on commodity speculation.

http://www.bloomberg.com/apps/news?p...d=aahxSrWaO00o

Rio Spying Cost China Mills $102 Billion, Agency Says (Update2)

Aug. 10 (Bloomberg) -- Rio Tinto Group, the world’s third- largest mining company, spied on China’s steel mills for six years, creating 700 billion yuan ($102 billion) in excess charges for iron ore, a report on a Chinese government-run Web site said.

Government agencies should enhance surveillance of companies they supervise, said the article posted yesterday on http://www.baomi.org, which is affiliated with the National Administration for the Protection of State Secrets.

China, destination for half the $52 billion annual trade in iron ore, detained four members of Rio’s Shanghai team a month after Rio abandoned a $19.5 billion deal with Aluminum Corp. of China. The arrest of the four, including Australian Stern Hu, strained relations with Australia.

“The article would appear to provide guidance on the nature of protecting state secrets rather than a specific comment on the Stern Hu case,” said Jia Liangqun, vice president of Mysteel Research Institute. “Rapid economic development has made the problem of information security more acute.”

Rio’s shares dropped 1.4 percent at 1 p.m. in Sydney today even as the benchmark S&P/ASX 200 Index gained 1 percent. Rio, based in London and traded in London and Australia, is the world’s second-largest iron ore exporter.
‘Without Foundation’

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Re: Bloom: Rio Spying Cost China Mills $102 Billion, Agency Says (Update2)

". . .cracking down on commodity speculation?"

I wonder how many suppliers' representatives are going to be willing to negotiate in China after this plays out (or represent potentially opposing business interests?) I have a hard time imagining that this is anything other than a hostage taking in the context of the contract negotiations.

I'm not saying that it won't work out in their favor, but the prospect of landing in a Chinese prison when the business negotiations don't go the government's way would make me reconsider the benefits of teleconferencing. And you know it's only a matter of time before Wal-Mart tries this with their suppliers!

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Re: Bloom: Rio Spying Cost China Mills $102 Billion, Agency Says (Update2)

". . .cracking down on commodity speculation?"

I wonder how many suppliers' representatives are going to be willing to negotiate in China after this plays out (or represent potentially opposing business interests?) I have a hard time imagining that this is anything other than a hostage taking in the context of the contract negotiations.

I really doubt the Rio Tinto executive Stern Hu will be worth anything at all to either the Chinese, Rio Tinto or Australia for that matter. He is merely a pawn for all sides.

For all that we may know, his prosecution is just for the evidence of the alleged corruption and espionage that is required for some official actions which we will find out once the legal proceedings have completed.

"I'm not saying that it won't work out in their favor, but the prospect of landing in a Chinese prison when the business negotiations don't go the government's way would make me reconsider the benefits of teleconferencing. And you know it's only a matter of time before Wal-Mart tries this with their suppliers!

Actually, I think the US will benefit immensely if the Chinese succeeds. GM will lose maybe a few billions less if steel prices have been lower. For consumer economies, the lower the prices of commodities, the better.

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Re: Bloom: Rio Spying Cost China Mills $102 Billion, Agency Says (Update2)

Actually, I think the US will benefit immensely if the Chinese succeeds. GM will lose maybe a few billions less if steel prices have been lower. For consumer economies, the lower the prices of commodities, the better.

I agree with you that it sounds like another tool in the negotiations over the iron ore prices; I don't know about how the US could benefit from it, though. The negotiations were just with China, the only country not to agree to a 33% drop in ore prices; they held out for 45%, but even if Rio Tinto got coerced into signing a contract for that, it is only going to be a benefit for the Chinese steel producers. Given the state of disarray in that industry it is hard for me to imagine that any of that would "pass through" to GM.

More likely, now is that a lot of GM execs who were thinking that they would make up their US losses in China are having second thoughts about how they will collect their winnings. . .

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Re: Bloom: Rio Spying Cost China Mills $102 Billion, Agency Says (Update2)

More likely, now is that a lot of GM execs who were thinking that they would make up their US losses in China are having second thoughts about how they will collect their winnings. . .

If they don't, Volkswagen will take over their share.

I'm just curious if the Chinese can show real and convincing evidence.

Whatever the outcome, one thing for sure is the Chinese government wants to reign in its commodity speculators.