Iron Ore Negotiations Between China And Rio Tinto Stall

Negotiations between China, the world’s largest steelmaker, and iron ore suppliers like Rio Tinto (RTP), are getting increasingly tense.

China is pressing for a 40% price cut relative to 2008 contracts whilst suppliers have only been willing to reduce prices by 33% in line with recent agreements made with Japanese and Korean steel producers.

Rio’s iron ore divisional CEO Sam Walsh responded to the stalemate in talks confirming the firm had now withdrawn from price negotiations. Walsh did articulate confidence that talks would resume but refrained from predicting a time-line.

In addition to the usual bargaining chips - a pile of cash - China also retains four Rio Tinto employees, arrested in July initially for “crimes against the state”. Walsh commented “We are respecting the judicial system and we’re pleased that our four employees have been able to hire top-notch lawyers. We’re supporting but standing back from that process and allowing the judicial system to take effect.”

Apparently Walsh confided with journalists that the arrests, rather than pushing the firm to agree to further price cuts had persuaded Rio to dig its heels in, refusing to be bullied or rushed.

China is increasingly frustrated that speculators have inflated commodity prices forcing it to pay top prices, endangering its economic growth which is dependant on securing vast quantities of minerals and metals.

In an effort to take the heat out of negotiations China has reduced the charges against the four Rio employees from crimes against the state to “bribery and commercial espionage”.

Looking forward a settlement is inevitable as both parties need each other, but the CV’s of certain Rio Tinto iron ore salesmen will forever have a most interesting detachment - July to August 2009, Beijing prison.

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