By Jason Scott
Aug. 10 (Bloomberg) -- Rio Tinto Group, the world’s second- largest iron ore exporter, fell in Sydney trading after a report on a Chinese government-funded Web site blamed the company for 700 billion yuan ($102 billion) in excess ore prices.
London-based Rio fell 3.3 percent to A$58.55, the lowest level since July 30. Jiang Ruqin, an employee with the Jiangsu Province Administration for the Protection of State Secrets, who wrote the report, said in an interview that he has no involvement in a case against four Rio workers detained in China last month, and that no “leaders” asked him to write the essay or reviewed the piece before publication.
The detention of the Shanghai employees, including Australian Stern Hu, has raised concern Rio’s $10 billion sales to the nation may be affected. China “could decide they’re not going to buy any more products,” from Rio though that’s unlikely, RBS Equities Australia Ltd. analyst Warren Edney said.
“That there’s continued adverse press regarding the relationship between China and Rio does concern me,” UBS AG analyst Glyn Lawcock said by phone from Sydney. “Sentiment will drive the share price in the short term until such time as the company comes out and they say ‘to date we have still seen no volume impact.’”
Lawcock is the second-most accurate predictor of Rio’s share price of 13 estimates compiled by Bloomberg, behind Edney. Edney, who has a “hold” rating on Rio, said the report won’t affect his rating.
‘Spies’ Benefit
Amanda Buckley, Rio’s Melbourne-based spokeswoman, declined to comment, referring to a July 17 statement from Sam Walsh, head of its iron ore unit, saying allegations “that employees were involved in bribery of officials at Chinese steel mills are wholly without foundation.”
Jiang, in the article posted Aug. 8 on the Web site http://www.baomi.org, said the Rio case amounted to “taking away 500 yuan from every Chinese citizen and it means giving $100 billion of ‘free’ gross economic product to the spies’ employers.” The site is affiliated with the National Administration for the Protection of State Secrets, was unavailable as of 3:54 p.m. Beijing time.
The figures Jiang used for the article came from China Central Television and the China Youth Daily newspaper, he said.
The allegations “are not new,” a spokesperson for Australia’s foreign minister Stephen Smith said today in e- mailed comments. “The government has always said the Stern Hu case was complex and involved serious allegations.”
Australia’s government continues to give “high priority” to the Hu case and will continue to take a “close interest” in his welfare, according to the e-mail.
Iron Ore Sales
Rio’s iron ore sales in the five years from 2004 to 2008 were $41 billion, according to Bloomberg data. China’s demand doubled in the five years to 2008 as crude steel output jumped 83 percent, according to Bank of America Merrill Lynch.
“The market sets the price, I don’t think there would’ve been any different outcome” in price talks, Mark Pervan, senior commodity strategist at Australia & New Zealand Banking Group Ltd., said from Melbourne. “It’s got nothing to do with Rio.”
Hu and three Rio executives were detained on July 5 for allegedly stealing state secrets and actions that harmed the nation’s economic interests and security. Australia has said the detentions may be connected to annual price talks for iron ore.
Enhance Protection
“The safety of economic information for China’s pillar industries is becoming more important especially as China will soon replace Japan as the world’s second-biggest economy,” Jiang wrote. “Competition from multinational companies has always exceeded the confines of business and become competition of strength in foreign affairs, politics, law, science and culture among countries.”
China’s government agencies should enhance surveillance of the secret-protection work at key companies they supervise, Jiang wrote.
“The article would appear to provide guidance on the nature of protecting state secrets rather than a specific comment on the Stern Hu case,” said Jia Liangqun, vice president of Shanghai-based consultancy Mysteel Research Institute. “Rapid economic development has made the problem of information security more acute.”
Jiang said his job at the State Secrets Administration is to write articles and draft letters. Last year he left a post as the director of the state secrets administration for Huai’an, a city in central Jiangsu province.
“The figures I used were all from CCTV and other media outlets,” Jiang said. “They represent my own opinion.”
On July 16, China Central Television reported that China “paid an extra 700 billion yuan in the past seven to eight years for iron ore imports.”
To contact the reporter on this story: Jason Scott in Perth at jscott14@bloomberg.net
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