Aussie PM warns China in Rio spy row

15th Jul 2009 12:07

Australian Prime Minister Kevin Rudd waded into the Rio Tinto spy scandal, warning China about its behaviour over the incident just as Aussie miners stop shipments of iron ore to China's steel producers.China has attracted criticism following its decision to arrest four Rio Tinto employees, one of whom is Australian, on charges of spying."Australia of course has a significant economic interest in its relationship with China," said Rudd. "Let me also remind our Chinese friends that China too has significant economic interests at stake in its relationship with Australia and with its other commercial partners around the world.""A range of foreign governments and corporations will be watching this case with interest. They'll be drawing their own conclusions as to how it is conducted." The four are accused of stealing state secrets to give Rio, the world's third-largest miner, an advantage in negotiations with steelmakers in annual iron ore contract pricing negotiations.Reports suggest the Anglo-Australian miner and potential joint venture partner BHP Billiton have stopped spot shipments of iron ore to China. That's sent prices up almost 10% in a week as Chinese mills scramble for whatever they can get.Tensions have been high since Rio scrapped a proposed $19.5bn financing deal with Chinese aluminium giant Chinalco last month, instead launching a $15.2bn rights issue and the iron ore joint venture with BHP.BHP and Rio account for 80% of Australia's exports of iron ore, with much of that heading to China. There's talk that China will cancel as many as 20 iron ore import licences as the spying row drags on.Today's development comes as Rio issued a second quarter production update Wednesday in which it said Chinese steel demand should continue to recover into the second half of this year. Aluminium output fell 5% during the quarter from the previous year, but global iron ore production rose 8% and refined copper 23%. Mined copper was down 1%.