I have a confession to make here - I am a Rio knocker - go check it out and shoot me if you don't like what I have written.
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BHP has more experience than RIO in the China trade. In fact, BHP is sitting quietly on the sidelines waiting for the RIO cake to fall off the table.
I wouldn't worry about the Chinese steel mill officers. This is not about punishing their own, it is about brinkmanship and an attempt to bring RIO to heel.
I concur with haunting's post. I have been involved in the China trade (steel) for years. The latest news is RIO has already recall some of their executives from China in fear of further reprisals.
Any vaccum that the RIO spygate may create there are plenty of other suppliers to fill in the shortfall and trust me BHP, FMG, Vale & many of the up and coming producers in the Mid West will be more than willing to take up the shortfall.
I wouldn't worry about the Chinese steel mill officers. This is not about punishing their own, it is about brinkmanship and an attempt to bring RIO to heel.
I concur with haunting's post. I have been involved in the China trade (steel) for years. The latest news is RIO has already recall some of their executives from China in fear of further reprisals.
Any vaccum that the RIO spygate may create there are plenty of other suppliers to fill in the shortfall and trust me BHP, FMG, Vale & many of the up and coming producers in the Mid West will be more than willing to take up the shortfall.
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haunting....I agree with your views on this situation. As the story unfolds and the public becomes more aware I think this will spell an end to Malcolm Turnbull's politicial career.
You may well be right.
But how long has it taken you to work out that a declining SP is caused by a heavier weight of selling than buying?
You may well be right.
But how long has it taken you to work out that a declining SP is caused by a heavier weight of selling than buying?
I have been spending the last 5 minutes counting my fingers... 1,2,4,3,8,5,6... and guess what? I still don't know how many fingers I have in total - can you ask a simpler question please?
**This news is my worst fear! I have been talking about this for quite a while now. If Vale is smart, all they need to do is to give the Chinese a small discount on top of the 33%... say 3-5%, and all Rio's sales will be theirs for the asking!
After this is done, Vale's next logical move is to get into Rio's copper market and wipe it clean... now where does all these place Rio?
If what I said above were to happen, just wait for this - Aussie recession in the next few quarters.
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Vale does not have the excess capacity to jump into RIO's shoes. But a combination of them can take up the slack. Maybe it can be farmed out to BHP, Vale, FMG and a few juniors.
However, IMO I don't see them shutting out RIO completely but they will do enough to force a rethink of the BHP/RIO fe merger.
However, IMO I don't see them shutting out RIO completely but they will do enough to force a rethink of the BHP/RIO fe merger.
Sean K
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So, RIO yesterday was wildly incorrect.
Today:
RIO is lower than it was at 10.10, gone lower than 52.26.
BHP went lower than it's 10.10 price, went higher than 35.18.
CBA opened about 39.70.
WBC has already been to 20.36, still above 20.00.
Score card: 0/5
You should shelve this magical mathmatical projection technique, or keep it to yourself at least.
Cheers.
You are probably right here. Got to say BHP has been extraordinarily smart in this game thus far.
Cheers.
Export prices plummet, threatening recovery
** those numbers I think are before spygate blew up in our face, now that the talk between Rio and the Chinese is in limbo and the Chinese is further found engaging in talk with Vale separately, more drop in export is almost a certainty. The question is more like how bad...
These are pretty clear signals that Rio's outlook is getting dimmer by the day... well, jmv, since I am up against a whole market full of analysts... I can't possibly outsmart the whole lots of them, can I?
** those numbers I think are before spygate blew up in our face, now that the talk between Rio and the Chinese is in limbo and the Chinese is further found engaging in talk with Vale separately, more drop in export is almost a certainty. The question is more like how bad...
These are pretty clear signals that Rio's outlook is getting dimmer by the day... well, jmv, since I am up against a whole market full of analysts... I can't possibly outsmart the whole lots of them, can I?
Rio have upped the ante. Someone somewhere is going to have a lot of egg on their face, or they're going to lose a considerable amount of it.
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Bribery claims without foundation: Rio Mining giant Rio Tinto Ltd says allegations that some of its employees in China have been engaged in bribery are "wholly without foundation".
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.17.07.2009 12:34 PM
Mining giant Rio Tinto Ltd says allegations that some of its employees in China have been engaged in bribery are "wholly without foundation".
Chinese authorities claim four employees of the world's third-biggest miner bribed Chinese steel mills officials during annual iron ore contract price negotiations.
Rio Tinto iron ore chief Sam Walsh on Friday bluntly denied the allegations and said the group was continuing to operate in China.
"Rio Tinto believes that the allegations in recent media reports that employees were involved in bribery of officials at Chinese steel mills are wholly without foundation," he said in a statement.
etc.
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Home » Articles » BREAKING NEWS » News
Bribery claims without foundation: Rio Mining giant Rio Tinto Ltd says allegations that some of its employees in China have been engaged in bribery are "wholly without foundation".
.
Text size +
Text size -
.17.07.2009 12:34 PM
Mining giant Rio Tinto Ltd says allegations that some of its employees in China have been engaged in bribery are "wholly without foundation".
Chinese authorities claim four employees of the world's third-biggest miner bribed Chinese steel mills officials during annual iron ore contract price negotiations.
Rio Tinto iron ore chief Sam Walsh on Friday bluntly denied the allegations and said the group was continuing to operate in China.
"Rio Tinto believes that the allegations in recent media reports that employees were involved in bribery of officials at Chinese steel mills are wholly without foundation," he said in a statement.
etc.
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When are people going to learn to keep their big mouths shut. Corruption & bribery is a way of life in China. To deny any of that ever took place is plain stupid. Why can't they just keep quiet.
Australians may see corruption & bribery as undesirable and "bad" but in certain countries a certain amount of "greasing the palm" is considered as desirable.
Australians may see corruption & bribery as undesirable and "bad" but in certain countries a certain amount of "greasing the palm" is considered as desirable.
Story time... no proof and totally hearsays. You draw your own conclusion.
1) Since July iron ore imports into China have begun to slow, with Rio/BHP showing rapid decline whilst the Indian and the Brazilian imports have been increasing.
2) According to ASXMarine, in the first 10 days of July there were only 5 ships loading outside the major iron ore ports, whilst in March, the highest number of ships outside of these ports was 55. The second quarter monthly average was about 40.
Vale's highest monthly number was 29 back in April. In the first 2 weeks in July its total has jumped to 24.
3) According to Rio's recent report, its Q2 production figure was 45.16 million tons (plse check, could be wrong), 43% higher than Q1, an increase of 8% overall.
4) Try explain the business as usual comment - an increase in production, good news, but why a decline in shipping?
1) Since July iron ore imports into China have begun to slow, with Rio/BHP showing rapid decline whilst the Indian and the Brazilian imports have been increasing.
2) According to ASXMarine, in the first 10 days of July there were only 5 ships loading outside the major iron ore ports, whilst in March, the highest number of ships outside of these ports was 55. The second quarter monthly average was about 40.
Vale's highest monthly number was 29 back in April. In the first 2 weeks in July its total has jumped to 24.
3) According to Rio's recent report, its Q2 production figure was 45.16 million tons (plse check, could be wrong), 43% higher than Q1, an increase of 8% overall.
4) Try explain the business as usual comment - an increase in production, good news, but why a decline in shipping?
And this - Trade price slump threatens recovery
[And this And this And this And this And this And this And this And this - are we there yet? 100 chars?]
[And this And this And this And this And this And this And this And this - are we there yet? 100 chars?]
Here is a follow up - click me!
More hearsays, please take it with a pinch of salt. Alternatively you can search directly through google... in any case, it's caveat emptor here.
1) the recent Chinese iron ore (IO) "restocking" is very much a furphy. The BDI shot up from around 1800 to 3800 starting from April was very much the "contribution" from Rio/BHP - they had been shipping IO to China non-stop with or without any actual orders. The unsold IO is right now sitting in various Chinese ports, as reported here, the total amount is about 68 million tonnes with 26 million tonnes Aussie ore, 17 million Indian and another 17 million Brazilian.
The shipping of Aussie IO to China serves two purposes - it helps pushing up the freight rate which again helps to push up the landing cost of Brazilian ore, Right now the Brazilian ore is costing about US25 more in rate than the Aussie, making theirs less competitive. It also helps to "confuse" the Chinese market, giving it an impression of recovery thereby providing "bullets" for the negotiation.
2) Because of the impasse in the negotiation where Rio was offering 20% with the Chinese (CISA) demanding 40-45%, there was some kind of "lock down" by CISA on most of the major Chinese steel mills; but at the same time, these steel mills needed IO for their production and from April to the time Stern Hu was arrested, these steel mills had been buying IO "unofficially" with Rio, at 33% especially after the Japanese-Rio deal was announced. This allowed the big steel mills to "scalp" their excess ore to the small to medium steel mills that didn't have direct access to the producers, usually at a big profit to these big steel mills. The scalping was so profitable that it was rumoured they actually made more money by being scalpers than being steel producers.
On the expense of the small to medium size steel mills, and with serious impact to the Chinese steel consumers, especially the auto makers - quoting CISA here.
The licensed distributors too were into the game, gouging IO to the regional smaller steel mills, that's one reason they are being targeted by CISA, with rumour that 20 odd of these licenses will be withdrawn.
3) To further reduce their stockpile of IO in various Chinese ports, Stern Hu and his team sold direct to the small to medium steel mills which are not under the control of CISA. They had been very successful in this area. There's a bit of ambiguity on their sales tactic, so, it's best not to dwell on it coz frankly no one knows what really transpired.
4) Here are some observations:
4.1) the sudden drop in shipment from Pilbara probably means right now there is still substantial unsold IO stockpile in China, hence there is no point to ship any more ore there unless there's specific order that is "paid" up front.
4.2) the excess IO stockpile in China would also imply the spot market is near dead, hence there's no auction offer from any of the producers as most of the potential bidders are now "too scare" to make any offer. So no buyer no auction. In addition, any auction offer would probably invite some low bid knocking off chunk from the current spot price.
4.3) CISA is saying negotiation is still on going - meaning, they are playing the attrition game with Rio/BHP. Also there's a recent report saying they are in talk with Vale, which could be true as Vale seems to be increasing their shipment to China. And accordingly Vale has stopped selling in the spot market, hence, it would be safe to assume the increase is meant for long term contract - it probably won't be stretching too far by saying the increment is meant for contracts seeping out of Rio/BHP. But this is just my speculation. No proof, as usual.
4.4) As the impasse drags on with the Chinese holding back deal with the Aussie suppliers and with the spot market near dead, what will happen to the IO stockpile in the various Chinese ports? Can they sit there forever? Is there some kind of rental cost involved? Dunno.
But at some point, I guess, the Chinese would exert pressure on these Chinese port authority, forcing them to demand action from Rio/BHP to remove these ore from the yards. What will Rio.BHP do? Are they going to ship these ore back or are they going to sell it cheap in the spot market or are they going to press the Chinese to fulfil their long term contract obligations? Dunno either. But one thing for sure, the pressure to do something is mounting.
4.5) Long(er) term? What next? What is going to happen to Rio/BHP's IO, copper, coal, etc...?
The Chinese are saying the Stern Hu affair will not affect both countries' trade but it seems at this moment they are not buying Rio's IO and they seem to be signing up with Vale, the question I like to know is - will it get worse?
Here's some food for thought...
More hearsays, please take it with a pinch of salt. Alternatively you can search directly through google... in any case, it's caveat emptor here.
1) the recent Chinese iron ore (IO) "restocking" is very much a furphy. The BDI shot up from around 1800 to 3800 starting from April was very much the "contribution" from Rio/BHP - they had been shipping IO to China non-stop with or without any actual orders. The unsold IO is right now sitting in various Chinese ports, as reported here, the total amount is about 68 million tonnes with 26 million tonnes Aussie ore, 17 million Indian and another 17 million Brazilian.
The shipping of Aussie IO to China serves two purposes - it helps pushing up the freight rate which again helps to push up the landing cost of Brazilian ore, Right now the Brazilian ore is costing about US25 more in rate than the Aussie, making theirs less competitive. It also helps to "confuse" the Chinese market, giving it an impression of recovery thereby providing "bullets" for the negotiation.
2) Because of the impasse in the negotiation where Rio was offering 20% with the Chinese (CISA) demanding 40-45%, there was some kind of "lock down" by CISA on most of the major Chinese steel mills; but at the same time, these steel mills needed IO for their production and from April to the time Stern Hu was arrested, these steel mills had been buying IO "unofficially" with Rio, at 33% especially after the Japanese-Rio deal was announced. This allowed the big steel mills to "scalp" their excess ore to the small to medium steel mills that didn't have direct access to the producers, usually at a big profit to these big steel mills. The scalping was so profitable that it was rumoured they actually made more money by being scalpers than being steel producers.
On the expense of the small to medium size steel mills, and with serious impact to the Chinese steel consumers, especially the auto makers - quoting CISA here.
The licensed distributors too were into the game, gouging IO to the regional smaller steel mills, that's one reason they are being targeted by CISA, with rumour that 20 odd of these licenses will be withdrawn.
3) To further reduce their stockpile of IO in various Chinese ports, Stern Hu and his team sold direct to the small to medium steel mills which are not under the control of CISA. They had been very successful in this area. There's a bit of ambiguity on their sales tactic, so, it's best not to dwell on it coz frankly no one knows what really transpired.
4) Here are some observations:
4.1) the sudden drop in shipment from Pilbara probably means right now there is still substantial unsold IO stockpile in China, hence there is no point to ship any more ore there unless there's specific order that is "paid" up front.
4.2) the excess IO stockpile in China would also imply the spot market is near dead, hence there's no auction offer from any of the producers as most of the potential bidders are now "too scare" to make any offer. So no buyer no auction. In addition, any auction offer would probably invite some low bid knocking off chunk from the current spot price.
4.3) CISA is saying negotiation is still on going - meaning, they are playing the attrition game with Rio/BHP. Also there's a recent report saying they are in talk with Vale, which could be true as Vale seems to be increasing their shipment to China. And accordingly Vale has stopped selling in the spot market, hence, it would be safe to assume the increase is meant for long term contract - it probably won't be stretching too far by saying the increment is meant for contracts seeping out of Rio/BHP. But this is just my speculation. No proof, as usual.
4.4) As the impasse drags on with the Chinese holding back deal with the Aussie suppliers and with the spot market near dead, what will happen to the IO stockpile in the various Chinese ports? Can they sit there forever? Is there some kind of rental cost involved? Dunno.
But at some point, I guess, the Chinese would exert pressure on these Chinese port authority, forcing them to demand action from Rio/BHP to remove these ore from the yards. What will Rio.BHP do? Are they going to ship these ore back or are they going to sell it cheap in the spot market or are they going to press the Chinese to fulfil their long term contract obligations? Dunno either. But one thing for sure, the pressure to do something is mounting.
4.5) Long(er) term? What next? What is going to happen to Rio/BHP's IO, copper, coal, etc...?
The Chinese are saying the Stern Hu affair will not affect both countries' trade but it seems at this moment they are not buying Rio's IO and they seem to be signing up with Vale, the question I like to know is - will it get worse?
Here's some food for thought...
It seems hard to believe that the shipping of Australian iron ore to China, without sale orders, and the stockpiling of that ore in Chinese warehouses, would cause the spot price of ore to increase!
Something doesn't add up here.
Not without that large pinch of salt.
Something doesn't add up here.
Not without that large pinch of salt.
To tell you the truth - I heard about all these through a tooth fairy last night... what you should do is to find out more from Rio or from your favourite analyst, hey should be able to help you with some sensible answers.
... yeah, one more thing, please go easy on salt if you have blood pressure.
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haunting, China got our gas at a very good price. I wonder if that being onsold too? If so Australia can't be blamed for trying to avoid being exploited on iron ore.
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I would indeed need to take a large dose of salt if I am to believe that China is stockpiling substaintial amounts of iron ore.
Iron ore takes up a lot of storage space. Can you imagine stockpiling 100 million tonnes of iron ore in China where space is at a premium?
I agree there is a certain amount of inventory build up when the price is low but massive stockpiling?? Gold and other precious minerals I believe you can stockpile and try to manupilate the market but iron ore???
I think it is only true to a much smaller extend.
Iron ore takes up a lot of storage space. Can you imagine stockpiling 100 million tonnes of iron ore in China where space is at a premium?
I agree there is a certain amount of inventory build up when the price is low but massive stockpiling?? Gold and other precious minerals I believe you can stockpile and try to manupilate the market but iron ore???
I think it is only true to a much smaller extend.
