RIO - Rio Tinto

[haunting]

Who wants to know more about Hu? Click here!

"We oppose artificial price increases in international iron ore trading and we oppose monopolistic activity in international iron ore trading," he said.
...
"China and Australia - especially in iron and steel trading - are complementary to each other. Chinese steel enterprises need to import iron ore from Australia; Australia needs to sell iron ore to China," he said.

"We should make great efforts together to maintain the long-term, healthy, stable development of the iron ore trade which will benefit companies from both countries."...

** I think he is being polite here...

1) what he really meant - the Chinese media didn't just beat up the story, they were being used as pawns/plots for disinformation/misinformation by the IO producers in the overall game of IO negotiation

2) the loss in overpaying for IO in the past few years according to the Chinese is in the region of 700b yuan (could be US$ coz the unit measure was very imprecise)

3) they were disappointed by Hu's over zealous attempt in serving his new master and forgot his "root"; to the Chinese, they believe there's no need of Hu to resort to that kind of tactic to make good of his contribution to his company at such a great cost to his fellow "Chinese"

4) they will not give what Marius K wants - an index based quarterly pricing system because they believe the Chinese is running a leaking boat in the IO game due to their internal disorganisation, hence they will opt for long term contractual pricing. Whoever, that is, whoever among the big three IO producers is willing to meet them half way will get the deal - translated, if the Rio/BHP team is willing to work with them like Vale does, they are willing to engage them (Rio/BHP), as indicated by the comments he made on mutual needs between the two countries.

But it is also quite clear that they, the Chinese will not compromise themselves on the past "monopolistic" manoeuvres by the IO producers. In fact, if this matter has risen all the way to the top echelon of the Chinese leadership, there's no way for any compromise for the Chinese negotiators under such circumstance, due to the fact that many big IO steel mills in China, including Baosteel, the chief negotiator in the past had been making much more money through IO scalping has not escaped close scrutiny by the Chinese leadership. The punishment for big time corruption could be very severe, which would make the any back down looks suspicious and for those who were willing "leaker" to undermine the IO negotiation to seriously pull back their horns regardless how much guanxi or backing they have. Their heads are on the line here.

The recent raising of steel price by Baosteel has been rumoured as their "show of force" to CISA, as that indirectly had put more pressure on CISA to accept the 33% offer, but based on CISA's reaction to all these pressures, and its steadfast refusal to budge indicates many "Chinese eyes" are watching, esp those at the top, at the situation with serious consequences to the Chinese negotiators. That however does not mean there's no serious consequences to the Australian IO producers... judging by all the song and dance act and the charm offensives made by Vale in pledging their sincerity for mutual benefits and to march in step with the Chinese objectives.

5) back to Rio/BHP - do they want to play ball with the Chinese? Or not?

 

[matty2.0]

Mate ... market is bullish on rio ... jumped up like 20-30% in the last week or so.

Any body think this rise is unsustainable??? Long term it might be justified however ...

 

[haunting]

It seems the Chinese are demanding a single IO price and to achieve that they are willing to adopt a high handed approach, sort of crash and burn strategy on their internal IO market structure, firstly by culling the 112 import licences to just about 5 or 6. In addition, they are talking about some kind of import quota (not sure on exporters or on importers) without specifying how it is going to implement such scheme.

They have also revealed the Chinese negotiators were "screwed" by the Japanese by agreeing with the 33% offer because of the cheap coal offers from BHP, whilst the Japanese had gained from both fronts (coal and IO), the Chinese were stranded by their high internal cost in coal production. Hence they were very unhappy with how the whole price negotiation and how it was structured. But most unhappy of all, they felt they are the largest consumer of IO and yet they were being bullied into a price taker instead of a price leader, due to the concerted price "scamming" among the producers.

And this is what they are saying after two days of talkfest - all the steel mills in China will accept only a single price, negotiated between China and the IO producers. Although they didn't say it, but it is sufficiently clear that they will disregard whatever price the IO producers had negotiated with other countries. To them, there's only one IO price, a Chinese IO price for all the steel mills in China.

Also implied was their emphasis on "Chinese market, Chinese rules" - not sure how they can enforce that and not sure what kind of impact this will have on the big three IO producers. But based on the IO price impact on their steel price and the overall economy, my suspicion is they will play hard ball from now on and if they can't really shake up the whole system within the next couple of years, they will persevere on it.

The heat is on...

 

[haunting]

Rio Tinto's $1.9bn Madagascar project under scrutiny...

** let me just parrot the local media by saying this Rio is innocent! It's the local government that is the corrupt party! Full stop!

Here are two other cases that would prove Rio's innocence if you don't believe me...

Guinea, Rio Tinto tensions escalate

Rio Four versus iron will of the state

** my pledge again - Rio is innocent!

 

[oldblue]

No. It is in fact quite a good idea at the moment. It's the future you have to watch out for - there's another 26 million tons to clear, whilst the Indian has 14 mln; and the Indian seems to have a higher rate of decline - 1.8% vs 1.5%. Ever watch a Fat Loser competition before? The one that loses most fat wins! I think the Indian is well ahead.

In addition, back on WA shore, 5 ships in last two weeks, do you reckon there is a boom going on over there and is "business as usual"?

No order no ship. No ship no sales. No sales cut production. Cut production = job retrenchment?

Try looking further and wider. It's the future you are investing in. Not the past.

According to BHP, the imported ore is going straight into Chinese furnaces and it's looking like "business as usual".

http://www.theaustralian.news.com.au/business/story/0,28124,25889018-5005200,00.html

 

[haunting]

Read here...

** a complete different slant from mine - what I see as threat, he sees as opportunity. I just hope he is not writing this as a spin for the companies. In any case, time and event will tell, especially over a longer period of time. Currently it is true that China is facing a lot of internal problem. In fact, their steel production is kind of out of whack with market demand. There is a mismatch of steel products - the market is in shortage of hot rolled steel whilst the steel mills have produced excessive cold pressed steel bar (not sure if this term is correct or not), hence the steel mills are rushing to meet the demand by buying more ore. But there's no question on the excess capacity and inventory and there's very high chance that the IO import will drastically slowdown in H2, which will only show sometimes in September onward since any order for ore will usually arrive in China between one to two months late. The current delivery/import figures in China are orders placed back in May/June period accordingly...

Going forward, it will be crucial to watch the Chinese response to the BHP/Rio merger. At this stage, I would say it's too early to claim China has laid down and played lame duck to the merger. I can see they have every intention of playing hard ball with both companies.

There is another point which has been totally ignored by him is that China has been shifting their new ore orders to Vale. This is a very clear indication that China is exercising their market power, in the process, weakening both companies in terms of cash flow. There is no telling if their practice will shift to other commodities or not. But if it does, I will dearly love to hear from this analyst again, just to find out if he is all happy with that development. Between confrontation and cooperation, the latter is always the better option as it provides a better outcome, usually a win-win solution.

Even Obama sees the need and merit of such option, and he's the most powerful on earth... anyway, time will tell and let's wait and see.

 

[oldblue]

Another take on reasons to be optimistic about the iron ore export business.

http://www.businessspectator.com.au...wn-goal-pd20090805-UM9QU?OpenDocument&src=kgb

 

[haunting]

Signals from China shake confidence

** gotta say I am getting quite tired of all these international media fight between the Chinese and the Aussie. There is simply so much figgin' emotion injected to their writing that I found them to be counter productive to both country's working relationship, which is crucial, esp from Australia's angle if we want to ride the coattail of the Chinese economic growth.

Thus far, if you were to pay attention to what is really going on, you would have noticed the SILENCE, firstly from the govt officials, secondly from the Rio management - they are the people in the know (sort of), of what is going on and what is needed to keep things going. No amount of hue and cry in the public or in the media, from the media corp will matter or help in this case.

... only through diplomacy, that, we can hope to see a positive outcome for both sides. There is simply a much bigger picture and much more at stake here than just Stern Hu and IO trades.

Like it or not, Stern Hu and his team have been involved in corrupt business practices. That is a fact. No matter how we want to argue or deny it. If anyone doubts this, just wait for it - when the Chinese are ready, they will probably get him to confess in front of the TV and make that a public trial - sure I can expect the argument of confession under duress, etc... but frankly, how and what else do they want to see to be convinced? More official documents to show Rio's management is involved? More local Chinese corrupt managers to be dragged to the Chinese court to confront and confirm Stern's guilt? And put his family in China into absolute hell?

Come on!

Next, state secret. The only "crime" China has committed in this case is their lack of clearly define sets of law on state secrets. In the USA, there are at least a few legislations with policy clearly defining what constitutes a state secret. If Stern were to be put to trial there, there's every chance he would be found guilty.

Because of their lack of clarity, that doesn't mean Stern is totally innocent here. If the crime were to have committed in China, why do they have to play by the Australian standard? Theirs is not an open system, everyone knows that. The fact that Stern is paid a high price to work for Rio is for this fact that he knows how the system works. And now that he is caught, he should know what is the consequence. If the local media finds it hard to accept this reality, tough!

The Chinese, after this incident is going to fix up their laws on state secrets, that is a fact too. They will have similar legislation similar to the USA and next time, there won't be any ambiguity.

Because of Stern's case, and this "murkiness" in Chinese state secrets will deter international corporations to invest in China... blah blah blah - gimme a break! For f**K sake, stop talking nonsense! This is in my view a real beat up! And I am willing to bet no one will give a damn! GM, GE and others will pour their investment into China because it's the only growing market in this world that is large enough for them!

Canada, is talking eagerly with China because they want the Chinese to invest in Canada! They wanted the Chinese firms to IPO there, they wanted the Chinese capital and investment! They don't see China to be a bad place to do business with!

The laws in China are well defined. What is murky is their implementation. The corruption laws are very clear and the penalty can be very severe. There was an execution reported yesterday on a senior Chinese corporate manager, and not too long ago, another was reported to be sentenced to death or life, depending on appeal...

For Stern Hu, his fate could be just as bad, but will be worse because of the responses coming from the local media, forcing the Chinese govt to exercise their harshest punishment to set an example! This is the least desirable outcome for Stern and his family!

...but, do the local media care? Do they really care!

 

[haunting]

BHP Billiton posts 62% drop in annual profit, demand from US, Europe & Japan improves

BHP Billiton Ltd, the world's biggest miner, has posted a 62 per cent drop in annual profit following a sharp decline in commodities prices, but says demand from North America, Japan and Europe is improving and demand from China would move closer to the real purchasing of customers in the near term.

BHP Billiton posted a 61.7 per cent decline in net profit to $US5.877 billion ($A7.14 billion) in the 2009 financial year.

Excluding one-off items, net profit fell 30.2 per cent to $US10.722 billion. Analysts had expected a net profit before one-off items of about $US10.2 billion - equivalent to a drop of about 33.7 per cent.

 

[LeeTV]

Rio Tinto employees formally arrested by China
The group could well end up on trial on corporate espionage charges but seems to have escaped the charge of stealing state secrets

Author: Chris Buckley
Posted: Wednesday , 12 Aug 2009
http://www.mineweb.co.za/mineweb/view/mineweb/en/page72068?oid=87398&sn=Detail

BEIJING, (Reuters) -

Chinese prosecutors have formally arrested four employees of Anglo-Australian mining giant Rio Tinto on suspicion of obtaining commercial secrets and bribery, the official Xinhua news agency reported on Wednesday.

Australian Stern Hu and three Chinese staff of the world's second-biggest iron ore producer are suspected of "using improper means to obtain commercial secrets about our country's steel businesses", Xinhua cited prosecutors in Shanghai as saying.

The commercial secrets charge can bring jail terms of up to 3 years, or 7 years in "especially serious" cases [ID:nPEK372992]. The procuratorate, or prosecutors, also approved their arrest on suspicion of "commercial bribery", said the Xinhua report.

Xinhua did not mention accusations of stealing state secrets, a sweeping charge raised in earlier reports, which can attract tougher sentences.

"The procuratoratial organ conducted investigations and believes that it has evidence for suspecting the four, including Stern Hu, of the above crimes," said the Xinhua report.

Hu and the three other members of Rio Tinto's Shanghai-based iron ore marketing team -- Liu Caikui, Ge Minqiang and Wang Yong -- were detained on July 5. Hu, a Chinese-born Australian citizen and head of the team, was accused of obtaining the Chinese steel industry's negotiating stance in iron ore price talks, sources have said. Iron ore is used to make steel.

The Rio case has cast a shadow over Australia-China trade, worth $53 billion in two-way terms in 2008. But China's sidelining, for now, of the graver state secrets accusations may indicate an effort to cool political contention over the matter.

"That lowers the temperature," said Jerome Cohen, an expert on Chinese law at New York University, speaking of the absence of the state secrets accusations.

"That puts this as a white collar crime, a commercial crime, and not espionage involving state secrets."

Chinese Vice Minister of Commerce, Fu Ziying, told a news conference in Beijing the case would receive a "fair verdict" -- a term suggesting a trial is certain -- and said it showed his government wanted to create a fair and open marketplace.

"I believe this case will not, and should not, affect the healthy and stable development of Chinese-Australian bilateral trade and economic relations," he said.

The arrests do not amount to a decision to go to trial but allow authorities to continue investigating, said Mo Shaoping, a prominent criminal lawyer in Beijing.

"The arrest means the suspects remain in detention and the police can continue investigations, usually for up to two more months," Mo told Reuters.

Cohen said that without the state secrets accusations, which authorities can use to justify keeping suspects entirely isolated, the Rio suspects stand a stronger chance of being allowed to see lawyers.

Rio Tinto's shares have fallen about 5% from their close at the end of last week of A$60.57, before a weekend report from China that said the company had been spying for six years.

The shares were at A$57.35 by 0400 GMT on Wednesday.

Rival BHP Billiton (BHP.AX: Quote)(BLT.L: Quote) has fallen about 1.3% to A$37.50 over the same period and the benchmark Australian S&P/ASX 200 index has risen about 0.6%.

NO COMMENT FROM RIO

Rio Tinto declined to comment when contacted by Reuters about the arrests. Rio has previously said the four did nothing wrong.

Australia's Foreign Ministry said Australian diplomats in Shanghai were informed of the arrests late on Tuesday but a spokeswoman refused to comment on whether China had softened its position by using the commercial secrets charge.

"We are not prepared to speculate, though the range of possible penalties under these articles is less severe than for state secrets," the spokeswoman said.

Prime Minister Kevin Rudd has warned China it had significant economic interests at stake in detaining Hu and that the world was watching how it handled a case that has highlighted the risks of doing business in the world's third-largest economy.

Australia exported $15 billion worth of iron ore to China in 2008, accounting for 41% of China's iron ore imports in that period.

The Xinhua report also said that in recent days Chinese steel executives had been formally arrested on suspicion of "providing commercial secrets" to Hu.

An online article published in a magazine run by China's state secrets agency at the weekend said Rio spied on Chinese mills for six years, resulting in the mills overpaying $102 billion for iron ore, Rio Tinto's biggest earner.

The Australian government on Tuesday dismissed the Chinese report, which had rattled investors.

"I think they (China) wanted to get the bad PR behind them as much as they could but at the same time get a message out to corporations operating in China," Scott Harrison of Pacific Strategies and Assessments, an Asia-focused risk consultancy company, told Reuters of the formal arrests.

"Although it may reduce international pressure, at the grassroots level I don't think its going to reduce the concerns of companies operating here," he said.

(Additional reporting by Emma Graham-Harrison in Beijing, Joseph Chaney in Sydney and Rob Taylor in Canberra; Editing by Dean Yates)

 

[haunting]

Rio Tinto Charges Spark Rare Uproar as U.S. Secrets Cases Surge...

** this is quite ironic really... but it sure doesn't bode well for Stern Hu. In fact, there are comments in China saying that there is no back down at all from China on this case as it has been a commercial case all along. Commercial spying is no less serious than stealing state secrets, and with bribery involved, the penalty could be just as serious. Some of the comments in the local media are quite off the mark by saying there is a back down in this case.

The only visible back down if there is any, is the media reaction towards CISA, it seems the govt is seeing CISA's prolonging of the IO negotiation be counter productive and is most unpleased with some of its suggestion of a single pricing structure as it clearly is unworkable due to the diverse and "disperse" nature of the small to medium size Chinese steel mills.

There may yet be changes in the Chinese side in terms of restructuring and reorganising of the "team".

Many are saying the Spygate has now moved on further into the next phase involving the corrupt Chinese managers who had been dealing with Stern and there is every chance that the govt will speed up this case to get a conclusion asap. This is by no means a favourable outcome to Stern as it implies the Chinese are confident of their investigation..

With regard to the IO negotiation - I think the producers have won this round. And possibly they will win the next round as well. The reason is quite simple really - the Chinese has beaten themselves silly in this case due to the many vested interests within their own ranks. The steel mills have been making so much money scalping and skimming off their own smaller brethrens that they have no incentive to change the comfy relationship with the producers, and in many ways they had actually sabotaged their own team in the negotiation. This is not something CISA can change overnight.

With the Spygate investigation into these corrupt managers, the background manoeuvre and house cleaning I believe will most likely weed out many of these "double agents". By the time they are done, I think, will be the time of real test for all the IO producers as there won't be any more "insider" info coming forward and the Chinese team would probably be more organised and readied for the negotiation.

 

[haunting]

China steelmakers urged to stop projects

A top government official in China has urged steel producers to stop projects aimed at expanding capacity as Beijing tries to curb a glut in the industry that is dampening prices.

"I would like to call on all steel producers, including major ones, not to construct any new projects within the next three years," Li Yizhong, minister of industry and information technology, told reporters on Thursday.

The Chinese steel industry suffers from a huge gap between annual production capacity, which comes in at 660 million tonnes, and demand, which only stands at 470 million tonnes, according to Li...

** the chairman of CISA is a paper tiger, although he has implicit support from the top, he doesn't really have an "offcial" role... but not this guy, Li - he is a minister and he can bite!

This shows the Chinese govt is taking over the mess in the steel industry and there is every indication that he is going to bang some heads.

In a different report I'd just read, he was also quoted as asking for cooperation from the IO producers, to recognise the fact that China is the biggest consumer of IO and as such, she should get the due recognition and should play a leading role in setting the IO price, esp with respect to China's demand... for mutual long term benefits.

Note this - he was asking and not demanding, which, in my view is China's subtle acknowledgement that they/CISA have lost the plot and the Chinese govt is now asking for cooperation from the IO producers. Couple with this report, it is quite clear that it's a carrot and stick approach. Let's say the big three continue to ignore this "official" request and continue to play hard ball by acting cartel like, and continue to push up the IO price, they should expect some kind of immediate domestic reaction from the Chinese govt - drastic moves such as immediate freezing of projects to cause a plunge in steel price, effectively killing off any potential rise in demand and putting downward pressure on IO sales.

If the IO producers were to react by holding back their sales, then, there is very chance that this stalemate will drag on with attrition becoming the defacto means of negotiation, which is really bad for all sides. This time, the Chinese would probably have a better leverage in that the real demand is declining, they had just done their restocking and hence would be able to meet any short term demand, and they can rely on the smaller IO miners - but I doubt if this will be adequate to meet all their needs.

On the producer side I guess it will be the same old tactic, except, the Aussie miners would have to watch the Brazilian closer this time - if they were to abandon ship and make a deal with the Chinese, that could mean really big **** for the Aussie.

Alternatively if the Aussie were to sign up with the Chinese, that will effectively kill off Vale's challenge in the Chinese market, which probably is not a bad idea, but then, thus far based on all the manoeuvres from both BHP and Rio, I gotta say this is not likely to happen... or we won't be facing the spygate incident and all these bad blood.

 

[haunting]

Rio's market intelligence iron edge over China

** I agree they, Stern Hu's team did a better job than the Chinese in terms of market intelligence, hence they were so confident that when the Chinese negotiators asked for a greater discount, they weren't about to budge.

But there is other info which has not been reported widely here, or if it has been reported, swept under the unreliable hearsay carpet by the local media. For example, the tax question, which according to the usual Chinese way of releasing info, there were questions on the tax paid by the Rio's Chinese office stuffs (too low), the amount of tax Stern is paying, and the amount of investment properties he owned in China. To explain all these, it seems there's a news that says he has been involving with bribery activities in both directions, ie, it simply means he giveth and taketh. At this point, it is all hearsays and conjecture from the Chinese media, which I think if there is any substance, will be used in his trial against him. We will find out in due time.

The question moving forward is this - without this grass root intelligence gathering, and without easy access to the small and mid size local steel mills, plus access to the iron ore mines in China, what are the iron ore producers going to use to negotiate with the Chinese?

The Japanese got the 33% discount because they are more organised than the Chinese. On top of that, they are investors in the iron ore producers. The Chinese don't, hence after this round, they are hell bent to fix up their leaking boat, and this is an uncertainty the IO producers are up against... from now moving forward, the Chinese will only improve on their position, whilst the producers will likely to stagnate in terms of market intelligence. At some point, I believe both sides will come to this conclusion, hopefully much earlier, that is, it's better to work out a solution that is more equitable to both sides.

Confrontation is a loser's game.

 

[haunting]

Here is an interesting development...

A Rio Tinto spokesman said the company does "not see this (Fortescue) pricing agreement as relevant to our pricing for fiscal 2009".

"Rio Tinto conducts its own negotiations with its customers worldwide, the spokesman said.

"Whether and how other producers reach their own agreements is up to them."

** the situation analysis - the Chinese says they won't give a damn to what IO price others have agreed, and Rio is saying they won't give a damn to what price China has agreed with other producer a la FMG - where will this take them?

The biggest IO producer did a deal with the second biggest consumer and used that to tell the biggest consumer to submit to their price; and now the biggest consumer has done a deal with the 4th largest IO producer and is using that as their benchmark for future negotiation and got a response that comes with two shafting fingers - who's gonna win at the end?

Does it mean the "tradition" of contract pricing is dead?

 

[Dark1975]

Rio announcement : Rio Tinto has received a binding offer from amcor to acquire the majority of the alcan Packaging Businesses,Good news.
Should i buy more?

 

[lianeisme]

Rio announcement : Rio Tinto has received a binding offer from amcor to acquire the majority of the alcan Packaging Businesses,Good news.
Should i buy more?

I bought more today I think they are a great stock to have in my potfolio I have 1684 of them at present.

 

[haunting]

Here is an interesting article on what would happen to those corrupt ones...

According to the act, if a US company is found to have been involved in bribery, its headquarter and overseas companies will be the subject of criminal and civil enforcement actions, resulting in large fines and suspension and debarment from federal procurement contracting.

A company listed on a US exchange or with significant operations in the US, such as Siemens, Europe's largest engineering company, which is listed in the New York Stock Market, is subject to the act irrespective of where the corruption occurs...

** now I am waiting to see what will happen to Rio if Stern Hu is found guilty. Will the US demand the evidence from China and proceed with their own investigation?

 

[jayinoz]

Looks like people do not know if RIO alo sale is good or bad. I think it is a good value sale. Concentrate on the commodities that are really producing for them.

The stock has fallen near 10% in the last few days. PE below 11 again. Yield OK for large miner. Thursday will be interesting.

 

[haunting]

Rock-solid Rio...

** I am a rather cynical and critical guy... and since I am such a nitpicker, I would take this report as a spin... my usual form and not too surprising...

Here is a brief summary of Rio's result, quite clean and factual, so it's good for consumption and probably good for your health...

Here is a report on why you want to keep Rio on your "under review" folder...

** coz, Rio made bulk of their IO profit through the spot market, which it now says the door has shut on them. And their current production, if I am not wrong is shipped to fulfil the existing contracts (signed while talk with CISA was ongoing), there is no mention of new contracts since "spygate", so, gotta wait for the next Q or next H to find out what's been going on there.

** then there's the question of next round of IO talk, coming soon... with a fair bit of uncertainty, issues such as China cutting back steel projects for the next three years and going around head banging to get their people from leaking confidential industrial info, etc... any assumption made at this point that IO demand will be good and business as usual in my view, is quite "funny", if not "silly"...

Is Rio rock-solid? Probably, coz it is laden with IO, all it needs is to find a buyer to unload... and everything will be "A-okay" I guess.

 

[thinkthendo]

Hi guys, the Price Sensitive Measures of RIO looks very well
however the debt is still high

Previous Close $56.31
Previous Close Date 21/08/2009
Dividend Yield 2.36%
PER 6.20
Market Cap. ($m) 34,170.67
Enterprise Value ($m) 89,853.40
EV/EBITDA 2.83
EV/EBIT 3.37
Mkt Cap/Rep. NPAT 5.14
Mkt Cap/Revenue 0.44
Price/Book Value 1.05

as mererial price goes up, I think it's a good stock to buy, I hold 401