* Rio says no activity in iron ore contract talks with
* Iron ore chief cites detention of Rio employees in China
* Provisional pricing at Japan-S.Korean benchmark
(Adds details, quotes)
By James Regan
SYDNEY, Sept 4 Rio Tinto (RIO.AX) (RIO.L) has
ceased attempts to forge an annual fixed iron ore price with
Chinese steel mills, the firm said on Friday, but it denied
media reports it was due to the detention of its negotiators in
News that negotiations were essentially dead for now was
little surprise to analysts given both sides' intransigence,
with the world's No. 2 iron ore producer sticking with the 33
percent reduction it agreed with Japanese and South Korean
mills in May while China's industry body dug in its heels for a
But the public acknowledgement of the halt showed Rio was
not rushing back to the negotiating table even after spot iron
ore prices fell 25 percent from their 2009 peak, and suggested
that there was a growing risk that this year's talks may never
formally conclude, a further erosion of the 40-year-old system.
Earlier in the day the Australian Associated Press reported
that Rio Tinto's iron ore head, Sam Walsh, had told reporters
that the talks had been suspended because of the contentious
detention of four Shanghai-based Rio Tinto employees --
including lead China negotiator Stern Hu -- on allegations of
commercial espionage, but a company spokesman denied this.
"Sam Walsh acknowledged there were no talks actively
underway at the moment. The benchmark price was set months
ago," a Rio Tinto spokesman told Reuters.
"It's got nothing to do with Stern," the spokesman added.
Rio Tinto and fellow Australian iron ore miners BHP
Billiton (BHP.AX)(BLT.L) and Fortescue Metals (FMG.AX) have
said mining and shipping of ore to China have not been affected
by the detention of the Rio workers, and freight fixtures show
that traffic continues apace, despite a brief
Earlier in the day AAP quoted Walsh as saying after a
business function in Perth: "At this point in time we're not
negotiating... Remember we have our negotiators detained."
Regardless of the reason, the absence of a price agreement
with the Chinese was becoming less relevant as the ore was
being "provisionally" priced anyway at the Japanese and South
Korean rates, which were agreed for the year to March 31, 2010.
"Maybe the year ends without an agreement and the Chinese
simply pay the same as the Japanese under the banner of a
provisional price, then live to negotiate a fresh contract next
year," said the chief executive of a small-mining company that
also sell ore to China and asked not to be named.
Last month, the semi-official China News Service reported
that China had suspended iron ore talks with Australian miners
but then it quickly withdrew the story.
The report, which the agency later said was based on a
false research report, sowed confusion and uncertainty in an
industry that has been in flux for months, as price talks drag
long past their deadline and become entangled with the
Rio Tinto's negotiators were detained and later arrested in
an crackdown on speculation in the Chinese iron ore trade, amid
concerns that speculators had been ramping up spot prices and
undermining the country's steel industry.
Spot prices raced to around $115 a tonne early in August --
nearly twice the Japanese and South Korean contract price --
but have since tumbled 25 percent in the past three weeks on
signs China's steel demand is weakening.
(Additional reporting by Mark Bendeich and Miyoung Kim;
Editing by Jonathan Leff)