Negotiations - Chinese way (Spy Charges)

[DaShi]

Individual steel producers are still making purchases.

[DanS]

At the prices set last year?

[DaShi]

I believe so.

[DanS]

Hmm... So why is delay due to this complication in China's best interests?

[DaShi]

Because China wants a significantly lower price for iron. They aren't getting it from Rio Tata. This isn't seen as a delay but either as a punishment for not giving into their demands or negotiating tactic (threat). As for the individual steel producers, they've been asked to not purchase the iron, but they need it to run their businesses.

[DanS]

They want a lower price for iron, and I want a pony.

If it's getting the old price, why would Rio Tinto feel any time pressure to sign a new contract? At the end of the day, certain executives are expendable.

[trev]

I think the sales to individual mills are roughly at current spot prices which are well done on last year, but a little higher than China is willing to negotiate to.

[dannubis]

Officially the contracts are over from July 1st (long term contract prices are negotiated apr to mar and the tonnage shipped after that is carried over fom the previous price to the current price). This means that Rio doesn't have to supply iron ore under the determined long term contract volumes any more. If they are smart the "big 3" stop delivering to the chinese. 2 things will happen: freight rates will tank making 50 % of the domestic chinese iron ore players above marginal cost bleeding them dry. 2nd, it will cause the iron ore spot prices to rise to unknown heights while all the other steelmakers have already their contracts settled, bleeding the chinese steelmakers dry again. Besides, it is monsoon season in India so no iron ore will come from there.
They are ****ed i tell you...

[trev]

Latest 'talk' from China seems to be that they are arresting a number of steel mill executives, probably the executives who have been doing one to one purchases from Rio Tinto and BHP Billiton. It seems to be the Chinese are determined to keep all the steel mills negotiating as a single entity and whoever breaks that stand, whether foreign executive or local steel mill executive is accused of working against China's national interest and arrested. No charges have officially been laid yet, but the Chinese PSB (secret police) state that they are suspected of espionage.

[trev]

Apparently a significant number of foreign companies are slowly but surely and very quietly reducing their staff numbers in China out of serious concern for the future of their staff.
Also the US Commerce secretary I think has raised the issue of the Australian Stern Wu and his detention with the Chinese governments at the highest level highlighting the concerns it has caused within American owned companies and the need for China to follow proper process in a transparent way.
The Chinese government has not released any significant information to the Australian Government on Stern Wu, allowed one very brief consular visit where the subjects to be talked about where strictly limited to family and personal issues only. The Australian government has got most of its information from Chinese websites and news outlets, the government of China is releasing almost no information or reasons for the detention itself.

[classical_hero]

The longer they let the go, the worse it will get for China's sake, since they will get bleed dry if they are seen to be refusing to pay what the market demands and since the have the demand, the power goes to the supplier since he controls the production and can hold off for awhile.

[trev]

The court case for Rio Tinto executives has ended. Stern Hu the Australian pleaded guilty to accepting bribes as did the other executives I believe, but think they pleaded not guilty to offering inducements to obtain commercial secrets. Australian consular staff were given access to the part of the trial dealing with accepting bribes only, and the section of the trial dealing with commercial secrets they were excluded from ( this being contrary to Australian- Chinese consular agreements, obviously not worth the paper they are written on).
Stern Hu was found guilty of all charges and sentenced to 10 years jail, the others were given sentences around 8 - 10 years.
There was an article in a newspaper here which quoted 'rumours' from Rio Tinto. Apparently Rio got experts to analyse all its Chinese operations after the arrests. Those experts found nothing suspicious in Rio's accounts and therefore the company believes its operations were all above board in China.
However the suggestion was that there were hints that its executives were doing privates deals with some steel mills in china in exchange for bribes. Principally the suggestion was that they were reorganizing delivery schedules to benefit small private mills in China in exchange for money. Usually state owned enterprises get first prioroity on all deliveries with major players 2nd and the minor players get whats left over if only. The bribes paid to Stern Hu changed this order.
It is believed some executives of chinese mills were also found guilty and sentenced, but only vague information available from the Chinese. As the offering of inducements to gain commercila secrets section of the trial was closed to all observers, there is no way of knowing the detail of these charges and whether there was truth in them.
But it appears there was truth in the charges of accepting bribes at least. It is a risky way of doing business in China and the million or so dollars they gained from it would not justify such a long jail sentence, so they will be regretting there actions now.
What is most disappointing from Australia's perspective is the failure of the Chinese to uphold the consular agreement between our 2 countries and the lack of a transparent court process. These aspects of the case cast a huge shadow over dealings with China and increase the personal risks of such business dealings no end.

[Dinner]

I imagine giving and accepting bribes are the usual way of things in a corrupt country like China.

[Zevico]

This isn't so much paranoia as blackmail. Business exec's worldwide have to do business with the Chinese Communist Party, but the Party is making it clear that it wants business done on its terms.

[dannubis]

Well, in the other news, Vale is asking 88 % increase this year... And the annual contract negotiations are being held in Singapore..