BHP Billiton Ltd. (BHP) said Tuesday it hasn't been approached
by China about any potential investigation into trading practices
at its iron ore division, leaving rival Anglo-Australian miner Rio
Tinto Ltd. (RTP.AU) in the spotlight.
"BHP Billiton is unaware of any investigation," a BHP
spokeswoman told Dow Jones Newswires. A senior executive from
Anshan Iron & Steel Group also said no officials from the
company are involved in the investigation into the alleged theft of
state secrets by Rio employees.
The comments come as the Australian government continues to
grapple with how to deal with the Chinese detention since July 5 of
four Rio Tinto executives, including the head of Rio's Chinese iron
ore division and an Australian citizen, Stern Hu, on accusations
they bribed steelmakers to obtain state secrets.
Some analysts and market watchers had speculated that BHP
Billiton could also be under investigation by Chinese authorities,
given the similarities in its iron ore negotiating strategy.
The Australian government continued to resist calls from
opposition lawmakers to intervene at a higher level in the case
Tuesday, amid growing fears that the episode could permanently
damage economic relations between China and Australia and alter the
way international firms do business in China.
Australian Treasurer Wayne Swan, speaking at a Canberra
conference on the Australia-China relationship, said that while a
swift resolution on Hu's detention is desirable, the government is
equally preparing for the "long haul".
Swan said that "megaphone diplomacy" will not resolve any of the
issues surrounding the detentions, signaling Australia will
continue its behind-the-scenes approach to the matter.
The treasurer told reporters that he was unable to comment on
the fallout from what is essentially a Chinese decision.
Rather, the Australian government will seek to resolve the
matter in an "appropriate way," he said, taking into account both
the interests of Hu, and the interests of the ongoing relationship
between China and Australia.
Despite the detentions, discussions between Australia and China
to secure a free trade agreement are ongoing and the government
continues to welcome foreign investment into Australia, Swan
said.
"Australian government ministers, including myself and the prime
minister, have been working with key Chinese ministers to find
common ground to resolve a number of contentious and sensitive
issues between us," Swan said.
Australia's center-left Labor government has been under
sustained fire from opposition lawmakers for its perceived lack of
action on the Hu case.
But Ross Garnaut, a former Australian ambassador to China and an
academic at the Australian National University, defended the
Australian government's approach Tuesday, noting that in his
experience, situations such as these are best resolved away from
the public eye.
"My experience as ambassador in China was that difficult cases
of this kind...are best handled away from the megaphones. That
helps the Chinese consideration of things and it helps the
effectiveness of Australian representations," Garnaut told
reporters.
Garnaut said it was "too early to tell" whether the Rio
detentions will have ongoing repercussions for Australia's economic
relationship with China, or for the way foreign firms do business
in China.
"I think it's too early. A lot more facts need to be known
before you have a basis for evaluation," he said.
Still, some analysts say the Rio arrests are a wake-up call to
Australia about the political risks of doing business in China.
Michelle Applebaum, an analyst with the Chicago-based Steel
Market Alliance, said a new economic model is likely to emerge
between global iron miners and their single biggest customer,
China, from the Rio arrests, as suppliers cut back on cash sales to
Chinese steelmakers in favor of European, Japanese and South Korean
customers who have already agreed to price cuts in annual price
talks.
"Ultimately, it will be the Chinese steelmakers who will now be
forced to bear the cost of these new variables - as the iron ore
majors and other western companies who depend on sales to China
begin to assess the true cost of serving the region," she said,
adding: "Bullying behavior backfires."
"In our view, Beijing badly misplayed their hand in the ore
negotiations this year, demanding a 40% to 50% price cut while
letting other global ore buyers set the new pricing structure,
which came in at a cut of 33%," Applebaum said.
"While China was stretching out the negotiations, steel market
conditions in the region have improved, and production for the
month of June is hitting a new all-time high - reducing leverage
and hurting the country's negotiating position," she said.
-By Rachel Pannett, Ross Kelly and Enda Curran, Dow Jones
Newswires;
61-2-6208-0901; rachel.pannett@dowjones.com