An impasse between the Chinese government and the world’s largest iron ore producers is being cited as the reason China has taken four Rio Tinto executives into custody.
According to a news item on the New York Times Web site, the four Rio Tinto executives (one Australian and three Chinese) were taken into custody by China’s Ministry of State Security in early July.
While the government has stated that its actions involve an espionage investigation, industry observers are concerned the arrests are related to China’s inability to work out a price agreement for iron ore with Rio Tinto, based in London, BHP Billiton, based in Australia, and Vale Do Rio Doce, based in Brazil.
China’s steel industry has grown to become by far the world’s largest, and it has been fueled by massive consumption of iron ore as the key ingredient.
An industry analyst quoted by the New York Times says the Chinese government is expecting to purchase iron ore at significantly lower prices since overall global demand for ore should have dropped because of global economic conditions.
Japanese steelmakers have reportedly signed contracts to purchase iron ore for 33 percent less than they paid in the previous 12 months, but Chinese steelmakers are holding out for a 40 to 45 percent cut.
A Chinese government news agency has reported that documents from a Chinese ministry may have been copied or otherwise transmitted to Rio Tinto, which could be considered an espionage-related crime.