How much does he know about the Chinese way?
by, 11th-June-2009 at 03:27 PM (789 Views)
Chinese lessons for Chinalco...
...a key reason the Chinalco deal failed was that Chinalco forgot the traditional Chinese way of doing business. When westerners, like myself, begin doing business in China, they are told to let relationships mature and take it step by step. Donít try and achieve the whole deal in a few meetings...
I hope he is talking sense here, expecting Chinalco to spend 20 b as a white knight giving up what a usual major share holder is entitled to if they were to be any corporation other than Chinese.
In any case, to the Chinese, the RIO board has always had the choice of not shaking hand with Chinalco when the deal was being negotiated at the beginning. Unfortunately they did. And that's why Chinalco is so pissed and is now asking for a RIO board overhaul and is accusing RIO as "dishonourable".
To openly use the word dishonourable in describing RIO's board, I think carries a lot of negative implications. How they will play out only time will tell. I see many are rushing to buy RIO to get into the rights issue of 28.80... well, it sure looks cheap but, here's a scenario/question: let's say RIO/BHP now jointly produces 40% of the iron ores but the Chinese are intentionally cutting back their long term contractual purchases with them, instead they opt for Vale because they see Vale as a more honourable supplier than RIO, what would that do to RIO/BHP? And their stock price?
If the Japanese and S.Korean are unable to absorb all their production, will they be forced to flog it cheap in the spot market?
The Chinese has spent the last few months hoarding all kind of commodities, esp the iron ore. With the steel industry right now facing consolidation, one can expect their future demand for iron ore be much reduced with the purchasing authority more concentrated, making them probably the largest force behind the demand side of the equation, with RIO/BHP the largest force behind the supplier side, who will have more clout in determining future iron ore pricing?
Which side of the contestant has more to lose?
Just wait and see, the next two quarters, dont' be too surprise if you see an Aussie recession coming your way, fast and furious. If I am Krudd, I will definitely reconsider any suggestion of an early election. Most definitely.