Letters and Blogs

The interest chain behind espionage

Stern Hu, Rio Tinto's top iron ore negotiator with China, was detained in Shanghai on July 5 on suspicions of spying. Some officials of Capital Steel have also been detained on grounds of stealing state secrets and causing economic harm. The case exposes the interest chain at play in the iron and steel market.

The market for iron ore is tightly controlled and dominated by leading mining companies Rio Tinto, BHP Billiton and Companhia Valedo Rio Doce (CVRD). China is the world's largest consumer of iron ore, buying half the global supply each year, leaving its iron and steel companies with little bargaining power over the pricing of iron ore imports. For several years, the three giants have reduced the iron ore supply to China to sell at higher prices. Worse, it is quite profitable to bribe top executives of Chinese corporations for confidential data on China's iron and steel industry -- for leverage in negotiation and splitting the corporate alliance.