The Battle For China’s Steel

The Economic Observer says the investigation into the leaking of China’s negotiating position at the iron-ore price negotiations earlier this year that has resulted in the detention without charge of four Rio Tinto employers has widened to include Baosteel, the largest steel company. (China Daily has reported that all 16 of the leading steel mills are implicated, though this remains unconfirmed.)

The Economic Observer also lays out the way the government stepped in to take control of this year’s annual price negotiations, dissatisfied that the individual companies were consistently getting the worse of each year’s deal, with the consequent impact on the economy of higher steel prices. By having the China Iron and Steel Association handle a collective negotiation, the government thought it could hold a tougher line on prices and stop the negotiating tactics leaking out by cutting the steel companies out of the picture. But what the Economic Observer suggests is that it was not price but quota size that mattered most to the larger steel mills. So secret side deals that have always taken place between the mills and the miners continued, and with them the mutually back-scratching relationships necessary to facilitate them. So in what has become a political power battle between government and the state-owned steel mills, officials are cracking down in the only way they know how, hard.

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