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BEIJING/PERTH (Reuters) – Rio Tinto Ltd's top iron ore negotiator is being held by Chinese authorities on suspicion of espionage and stealing state secrets, Australia's foreign minister said on Wednesday.
The details about the detention of Stern Hu, as well as three other Rio employees, emerged just as a Shanghai paper reported Chinese steel mills have finally given in on annual iron ore prices, agreeing the same 33 percent cut other Asian steelmakers set earlier, but for six months instead of a year.
It was unclear whether there was any relationship between the two events, but the detention follows a period of increasingly tense relations between the two vast trading partners, with iron ore price negotiations going down to the wire and Rio snubbing a planned $19.5 billion investment by Chinalco last month.
Australian Foreign Minister Stephen Smith said Hu had been detained on suspicion of espionage and stealing state secrets, adding there was no evidence for drawing any link between his detention and any commercial matters concerning Rio such as the collapsed Rio/Chinalco deal.
Smith also said he was very surprised by the detention and reasons for it.
IRON ORE DEAL SAID
Separately, the China Business News reported on Wednesday that Chinese mills had agreed to new iron ore prices for six months instead of the usual one-year deal, and had already begun negotiating on the next six-month phase.
The deal, which could not be immediately confirmed, would conclude some nine months of tense negotiations that threatened to scupper the decades-old annual pricing ritual and would frustrate China's efforts to wield more clout on global commodity markets, even where it is the dominant buyer, such as iron ore.
Several Chinese steel officials Reuters contacted on Wednesday said they were unaware of any settlement, though two sources not directly involved in the discussions said they had heard of a possible agreement, but could not confirm it.
"All news should be subject to the statement from CISA and Baosteel. I have nothing to say about the news," Chen Xianwen, head of the market research department at the China Iron and Steel Association industry body, told Reuters.
The Shanghai-based newspaper, backed by a local government agency, said China had agreed to pay $0.97 per dry metric tonne unit for Pilbara blend fines and $1.12 per dmtu for Pilbara Blend lump, but only for April through October. It said negotiations were already underway for the following period.
But the newspaper said its sources could not say which of the big iron ore suppliers had signed the deal.
A 33 percent cut would be in line with what analysts have been expecting as Rio Tinto showed no inclination to relax its "take it or leave it" stance on the initial deal, and an economic recovery lifted spot market prices above new contract levels, leaving China with little leverage.
"It's a report but it is certainly the deal that we expect to be done. It always seemed likely that the outcome would be no change from Japanese settlement," said Mark Pervan, a senior commodities analyst at ANZ.
"The mills have started to pre-empt this move; Baosteel kept its (steel) prices on hold for its main products so they were obviously preparing for this outcome."
(Reporting by Tom Miles, Alfred Cang, David Stanway, Nick Trevethan, Rob Taylor, Denny Thomas and Mark Bendeich; Writing by Miyoung Kim; Editing by Clarence Fernandez and Jerry Norton)