Chinese officials arrest four Rio Tinto mining employees

Unexplained detentions come as China and miners battle over iron ore prices

The Chinese authorities have arrested four employees in Rio Tinto's Shanghai office, it emerged yesterday. The mining giant was unable to confirm details, but the Australian press has named the Australian passport holder Stern Hu and three Chinese nationals from the group's iron ore team as the detainees. The arrests are understood to have taken place on Sunday.

A spokesman for Rio Tinto said: "It appears that four employees from Rio Tinto's Shanghai office have been detained for questioning by the Chinese authorities in Shanghai. The reasons for these actions are unclear.

"Rio Tinto intends to co-operate fully with any investigation the Chinese authorities may wish to undertake and has sought clarification on what has occurred. Rio Tinto is concerned about the employees' wellbeing and is doing everything possible to help them and support their families."

The arrests are just the latest problem for Rio in China. The company is already embroiled in tense negotiations with the China Iron and Steel Association (Cisa) over the price of this year's iron ore supplies. Chinese press reports have accused Rio of withholding iron ore from the spot market, as a way of pushing prices up and putting pressure on China's negotiators.

The situation showed little sign of agreement. According to the Australian daily The Age, the company's iron ore team has been holding meetings in Hong Kong and Singapore for several weeks for fear that phones and emails could under surveillance. And unconfirmed speculation yesterday suggested that alleged manipulation of the iron ore market could be behind the arrests.

The row over iron ore supplies started in May when Rio Tinto agreed to slash its prices by a third for Japan's steel mills, while its Chinese customers were fighting for a much larger discount. At that point, the annual price talks between the world's steelmakers and the three big iron ore producers – Vale, BHP Billiton and Rio – had already dragged on beyond the April deadline.

But although the first deal usually sets prices across the board, Chinese groups, represented by Cisa, have still not backed down despite the expiry of a number of contracts last week. Chinese customers have demanded price cuts of up to 50 per cent in the face of global recession and falling demand.

Rio is also unpopular in China for its last-minute withdrawal from a $19.5bn (£12bn) tie-up with Chinalco. The deal floundered on shareholder anger at having their pre-emption rights overridden.

Dual-listed Rio saw particularly virulent opposition from its Australian investors. The political climate was also inhospitable: the main Canberra opposition party promised to veto the deal, and one senator took out television ads calling for it to be blocked.

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