Friday, 31 July 2009

The Labor Party way

We should have realised when Peter Beattie handed over the Premier’s reins in Queensland to Anna Bligh just how crook things had become.

It is the established Labor Party way to turn to a woman only when the men have let things get out of control. They gave Joan Kirner the poison chalice in Victoria after the State Government was nearly sent broke under John Cain. In Western Australia Carmen Lawrence inherited the mess discovered by a Royal Commission that sailed into the messy wake of the Brian Burke led corruption.

But in normal circumstances the overwhelming majority of men in a Labor Party Caucus tend to choose one of their own. That Clare Martin was given the job as Opposition Leader in the Northern Territory in 1999 was really no different. The men of Labor might not have been trying to rescue a government about to be thrown out, but their attempt to preserve a disastrously small rump in the parliament was just as desperate. The gratitude of Ms Martin’s male colleagues for her amazing victory at the 2001 election was shown by their incessant backbiting and sniping, which encouraged her to finally resign as Chief Minister when there was a decent majority after a second wonderful win. Rosemary Follett, chosen to be Chief Minister in the very first, and very minority, ACT Government, is the only woman Labor has given the leadership nod to in anything approaching normal circumstances.

For those of us outside of Brisbane with but a passing knowledge of, and interest in, Queensland politics, the retirement of Peter Beattie as Premier appeared almost a routine action of a sensible politician who knew that in a proper democracy nine years at the top was enough. If his advocacy of a woman to succeed him was a little surprising, it also seemed a quite admirable departure from the established masculine domination. Only recently has the underlying corruption that the Beattie years kept largely hidden emerged to put the Anna Bligh appointment in the more orthodox Labor Party tradition: when in trouble, go for the feminine touch.

Hoping for First Dog’s support

I am a little diffident about approaching First Dog on the Moon with this request out of fear that the Moon bit in his name has something to do with Moonies. I am a bit of a dog fancier and have been persuaded to take up the cause of the dogs of South Korea by joining a worldwide campaign to get dog meat eating banned. First Dog would appear to be a natural ally, but I presume that the Moonies of that North Asian peninsular are as prone as the rest of the nation to chomping on a cooked dogs leg.

Perhaps this photo from the Seoul Times will persuade him to join the fight with me:

The Stop Killing Dogs petition will be presented to the Korean officials in Seoul by the Korea Animal Rights Advocates when at least or more than 1 million signatures have been collected.

And who knows. First Dog on the Moon might even do a little drawing that we can forward to the South Korean Ambassador to apply some real politiical pressure.

Unless, of course, he is actually a dog meat eating Moonie.

Thursday, 30 July 2009

The national poker machine party

There’s a rough justice really whenever the Anti Pokies Party Senator Nick Xenophon is responsible for thwarting the plans of the Rudd Labor Government for the Labor Party in Canberra is one of the nation’s big beneficiaries from poker machine revenue. Up until now the cash generated from the machines has gone into the coffers of the local Australian Capital Territory Branch but the prospect of a multi tens of million dollar jackpot has seen the Federal Labor authorities start muscling in.

The windfall pokies payout will come from taking advantage of a provision in the constitution of clubs trading as a company under a Canberra Labor Clubs banner that makes the Labor Party, rather than the individual club members who put their hard earned through the machines, the beneficiary of any profits that result from a sale. Last year directors of these Labor Clubs determined that the best interest of the company (effectively the local Labor Party branch) would be served by finding a buyer and the Party pocketing the lump sum.

Given the political difficulties for the ACT Labor Party of being the Government determining such matters as who can have poker machines and under what terms while being the Territory’s biggest poker machine operator there was an element of good sense in that decision. The election of Senator Xenophon to represent South Australia had just made it more so.

The Labor Club directors — a majority appointed by the ACT Labor Party Branch — went through the process of getting legal and financial advice and ended up negotiating seriously with the local territory division of the CFMEU trade union which too is a big clubs operator under the Canberra Tradies name. With the deal on the verge of being done something prompted the officers of the Federal Labor Party branch to stick their bib in. An interest in getting its own hands on the $25 million was clearly apparent but some of my informants say there was a great deal of resentment from the right wing members of the Federal Executive that the left leaning CFMEU would emerge as a winner from the deal as well.

Threats of federal intervention were made with real vigour when a figure was noted in some of the legal advice that the value of the clubs being sold was nearly $45 million rather than $25 million.

Now finding a market price for licensed clubs is no easy matter because the purchaser has to have some semblance of being a not-for-profit organisation. A shortage of potential buyers makes the market a relatively thin one as the Labor Clubs found. An added complication comes from the directors also having to deal with the interests of club members - as distinct from, and as well as, the beneficiaries of a sale.

The unsuccessful tender of the right wing National Union of Workers for around the same figure as offered by the CFMEU fell at that hurdle as the cash component was only some $10 million with the rest of the $20 million to be paid from future profits.

The whole sale process has now turned quite ugly with Federal Labor strong arming local ACT Labor into putting things on hold but the directors of the Canberra Labor Clubs refusing to do so. The directors have in their mind that the Australian Securities and Investment Commission expects them to act in the company’s best interests, even if this may not be in your own interests, and even though you may have set up the company just for personal or taxation reasons.”

The ACT branch’s administrative committee, with the support apparently of the Federal body, has now ordered the directors the Party has on the Club Board to change their mind when they meet again next week. If they refuse to do so they are threatened with the sack although that would involve ASIC in having to make some very interesting decisions about the obligations of directors and attempts by third parties to prevent those directors from acting in the best interest of their company.

I am sure that the lawyers are ready and waiting to see how much of the $25 or $50 or however many millions they can carve off before anyone else gets a dollar. And surely Senator Nick will soon decide that this is just the kind of Labor skulduggery that should see the light of an investigation by a Senate Committee.

An organic food con brings on MacDonalds

I’m feeling a bit cheated this morning. I have got into the habit of buying organically grown vegetables despite the considerable extra cost over the standard alternative. I had somehow convinced myself that the price was worth paying before of the extra good they would do my ageing body. And what do i find when I do my morning survey of the world’s press. This headline all over the London Daily Telegraph: “Organic food has no added nutritional benefit, says Food Standards Agency - Expensive organic food is no better for you than conventionally-grown farm produce, according to the Government’s food watchdog.”

In shock and horror I quickly moved to the quoted academic journal from the story derived in the hope that there was some cruel misinterpretation of the real findings. Alas there was no joy in theAmerican Journal of Clinical Nutrition. The authors of “Nutritional quality of organic foods: a systematic review”  — Alan D Dangour, Sakhi K Dodhia, Arabella Hayter, Elizabeth Allen, Karen Lock and Ricardo Uauy  — had been quoted correctly.

I bring you the evidence that has left me so depressed I am going out to buy MacDonalds:

ABSTRACT

Background: Despite growing consumer demand for organically produced foods, information based on a systematic review of their nutritional quality is lacking.

Objective: We sought to quantitatively assess the differences in reported nutrient content between organically and conventionally produced foodstuffs.

Design: We systematically searched PubMed, Web of Science, and CAB Abstracts for a period of 50 y from 1 January 1958 to 29 February 2008, contacted subject experts, and hand-searchedbibliographies. We included peer-reviewed articles with English abstracts in the analysis if they reported nutrient content comparisons between organic and conventional foodstuffs. Two reviewers extracted study characteristics, quality, and data. The analyses were restricted to the most commonly reported nutrients.

Results: From a total of 52,471 articles, we identified 162 studies (137 crops and 25 livestock products); 55 were of satisfactory quality. In an analysis that included only satisfactory qualitystudies, conventionally produced crops had a significantly higher content of nitrogen, and organically produced crops had a significantly higher content of phosphorus and higher titratable acidity. No evidence of a difference was detected for the remaining 8 of 11 crop nutrient categories analyzed. Analysis of the more limited database on livestock products found no evidence of a difference in nutrient content between organically and conventionally produced livestock products.

Conclusions: On the basis of a systematic review of studies of satisfactory quality, there is no evidence of a difference in nutrient quality between organically and conventionally produced foodstuffs. The small differences in nutrient content detected are biologically plausible and mostly relate to differences in production methods.

Wednesday, 29 July 2009

Nothing hysterical about Alexander

Quite a fascinating interview in the media yesterday with the former Foreign Minister Alexander Downer which seemed to me to endorse the quiet diplomacy approach that Australia is adopting to the imprisonment in China of Rio Tinto executive Stern Hu. There was certainly no impression from Mr Downer that he thought the current Government should have taken the advice of current Liberal Leader Malcolm Turnbull and been more direct and bluntly critical in dealing with the communist government. On the contrary the Downer verdict was that “just because something’s big in the media, doesn’t really mean anything in Australia.”

To his mind the Hu case had not changed anything in the political relationship between the two countries:

Australia has a lot of very big interests in China and China has pretty big interests in Australia, so you know to be frank with you I don’t really know enough about this case and the efforts to try and find out. I haven’t made great efforts to find out, but the company Rio hasn’t wanted to tell us, so given that they don’t tell us anything about it, we don’t really know. And there’s no reason why they should, by the way, but if they don’t want to tell us, well then there’s not much we can do. …

we’ve been dealing with state-owned enterprises for decades in China  — since the 1970s. So this is one incident that has arisen, but we have done tens of thousands of transactions with China over the years. The argument here is: has China decided to do something fundamentally different and is this an indication that they have? Are they going to start going around arresting business executives left, right and centre or is that the plan? And I think the answer to that, is that that is not likely to be the plan. So, what has happened in this case?

See, the facts are going to be the key to understanding this case and bearing in mind we don’t know what the facts are if the company doesn’t want to tell us which is fair enough. I’m not saying they should, I’m not being critical of them, but it’s hard to know whether this case is as you would say it’s sui generis. It strikes me that it is sui generis [unique in its characteristics]. It may or may not be unfair, but it does strike me as being sui generis.

As interesting to me as what Mr Downer said on this subject was where his views were published. While I might be playing what newspaper chief executives see as the normal parasitical role of an internet journalists I was not quoting from the result of hard work by some main stream media outlet but from the Business Spectatorwebsite that is related to this one. This was not some insightful reporting from the mainstream but an example of how some internet only news sites are doing a better job of reporting than the traditional newspapers.

Keeping Medibank private public

I notice that in the United States one of the four key planks of Barack Obama’s health insurance proposals is that there be a government-run insurance plan competing with private insurers to help hold down costs. Without such a public organisation the belief among Democrats is that the free enterprise way would result in excessive premiums. How strange then that within the Australian Labor Party the push continued until the eve of this week’s national conference to allow the sale of Medibank Private, the government owned insurer that I’m sure has played an important role in keeping premiums down.

Remember it is the Senate that will decide

At the risk of sounding like a broken record I write yet again that the most important truth about this Labor Government is that it is a government without the numbers to actually govern. As we ponder what will end up happening to the Australian health system we have to remember that Labor does not have the numbers in the Senate.

Neither Kevin Rudd nor all of his ministers can determine the health or any other legislative outcome. The real decision about what changes we end up with will be made in the party room of the Coalition and then, if the decision is to oppose what Labor proposes, by the Greens, Family First and anti-Pokies parties.

Tuesday, 28 July 2009

Answering a Royal question

It seemed a simple enough question at the time, back in last November at the opening of a new building at the London School of Economics: “Why”, Her Majesty Queen Elizabeth II asked the distinguished economists about the world financial crisis, “did nobody notice it?” Professor Luis Garicano, director of research at the London School of Economics’ management department, did his best.

The London Daily Telegraph reported at the time that Prof Garicano told the Queen: “At every stage, someone was relying on somebody else and everyone thought they were doing the right thing.” It was hardly a startling explanation and the Monarch, whose private wealth is estimated at £320million by Forbes magazine, including a personal investment portfolio valued at £100million, appeared unimpressed. Normally not one to express a public opinion about a controversial matter she was heard to describe the turbulence on the markets as “awful”. Portfolio losses tend to affect investors with a churlishness like that.

With the honour of their profession so clearly challenged, the economists of the LSE called in reinforcements to attempt a more definitive response. The content of a suitable reply was discussed at a special seminar conducted at the British Academy in June that was attended by economic heavyweights including Treasury permanent secretary Nick MacPherson, Goldman Sachs chief economist Jim O’Neill, Observer economics columnist William Keegan, Paul Tucker, deputy governor of the Bank of England, Vernon Bogdanor, the constitutional expert from Oxford University, and HSBC’s chief economist, Stephen King. LSE professor Tim Besley, a member of theBank of England monetary policy committee, and the eminent historian of government Peter Hennessy were given the drafting role to explain the “psychology of denial” that gripped the financial and political world in the run-up to the crisis.

With all the benefits that hindsight can bring, the three-page missive from the group of eminent economists explains to Her Majesty that there was “a failure of the collective imagination of many bright people”. As explained in the letter, extracts from which werepublished in the Observer on Sunday, that as as low interest rates made borrowing cheap, the “feel good factor” masked how out-of-kilter the world economy had become beneath the surface, with some countries, such as the US, running up enormous debts by borrowing from others, including China and the oil-rich Middle Eastern states, that were sitting on vast piles of cash.

Despite these yawning imbalances, they say, “financial wizards” managed to convince themselves and the world’s politicians that they had found clever ways to spread risk throughout financial markets — whereas “it is difficult to recall a greater example of wishful thinking combined with hubris”.

Everyone seemed to be doing their own job properly on its own merit. And according to standard measures of success, they were often doing it well,” they say. “The failure was to see how collectively this added up to a series of interconnected imbalances over which no single authority had jurisdiction.”

That meant when the reckoning came it was extreme, starting in summer 2007 and culminating in the near-collapse of the entire world financial system after the bankruptcy of Lehman Brothers last autumn.

In summary, Your Majesty,” they conclude, “the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole.”

Will it be lawyers over the dining room table?

There’s nothing like a restaurant review to bring on an entertaining defamation case, so I am following the early stages of what promises to be a lengthy saga between the Adelaide Hilton’s Grange Dining Room and the food editor for the Weekend Australian, John Lethlean, with a real voyeuristic interest. Lethlean set things rolling with a piece in the Weekend Oz that gives this restaurant a rattling good bake which I could not do justice to with just a few extracts. Read the whole thing. It’s criticism of the sharpest, cruelest and wittiest kind. And criticism made all the more upsetting for the hotel because it came on the eve of what was surely meant to be one of its night of nights.

The Hilton has long promoted Cheong Liew as the face of The Grange under the slogan “Who’s cooking your dinner tonight”. And last night he accepted a lifetime achievement award from the city’s peak hospitality body, Restaurant and Catering SA. Not that the Malaysian-born celebrity chef is accepting responsibility for serving what a critic considered to be unsatisfactory value for $169 a head without wine.

As he prepared to accept the award from his peers, Liew broke his silence to tell The Australian this morning he had not read the review but but it was up to the management of the hotel, which hosts The Grange Restaurant, to maintain standards. “If a person is not happy about the restaurant, it’s up to you to talk to the Hilton, it’s nothing to do with me,” he said. “I’m purely a consultant. I’m there to train them to do the dishes and I’m training them to develop the culture.”

Exactly what that culture is, is now a matter of some conjecture and well might the diners ask “who’s cooking their dinner tonight.”

Hiding the bad news

It surely has been a long time since a new Newspoll did not make the front page of The Australian but it was relegated inside today. News so dismal for the Liberal Party, perhaps, that it was deemed too unkind to trouble the readers by giving it any prominence. To give credit though to Dennis Shanahan, the man with the unenviable job of putting a spin on figures to keep hope alive, he declared a fortnight ago that the figures were so bad that Malcolm Turnbull’s leadership was “terminal” and the fortnight before that his conclusion was that the Turnbull political career had been “smashed”. There was absolutely nothing in this latest collection of figures that would want him to change either of those previous opinions.

Monday, 27 July 2009

School league tables and property values

Want to give your property value a bit of a push along? Then start hoping that you are in an area where your local school does well on the soon to be available student results testing tables. And if your local is down the league ladder then hop in to help the local P&C improve facilities because there’s evidence from the United States to suggest that strong public schools attract home buyers and businesses.

The Baltimore Sun carried the story at the weekend of an unusual not-for-profit community organisation called the Greater Homewood Community Corporation whose executive director Karen Stokes uses public school test scores to market her community. “If the school improves, the neighborhood improves,” said Ms Stokes. “And your real estate values will improve. Even if you have no children in the school … what happens in your local school really does matter.”

The very thought that the results of standardised tests like those Federal Education Minister Julia Gillard is forcing state governments in Australia to introduce will be used to sell houses is sure to cause near apoplexy among the local teachers unions but they had better get used to it. Test scores are often the first thing homebuyers research if they’re relocating from out of state, said Sue Hemmerly, a real estate agent at Long & Foster in Timonium. She’s been in the business for 27 years and remembers when relocating families had to rely on scores clipped out of newspapers and mailed to them by their agents. Now prospective buyers get statistics online, often before they’ve called her. “They come in with very exact ideas of what school they want,” Hemmerly said.

Eric Schwartz, an appraiser with A&E Appraisal Services Inc., told the Sun his Glen Burnie house would be worth at least $25,000 more if it were just a few miles away in Severna Park with its high-scoring schools. He has empirical evidence to back him up: The builder put identical models in both places. “I couldn’t afford to live in the Severna Park system, so I bought where I could afford,” said Schwartz, 53. His daughter and son-in-law, who live nearby and have three young children, are already thinking about moving in a few years into “what they consider a better school district,” he said.


An old fashioned roundsman.

If it’s Monday you can look with confidence for a story featuring in The Sydney Morning Herald andThe Melbourne Age breaking news about the federal health system. It has struck me several times recently when preparing the Crikey Breakfast Media Wrap at the start of each week how Mark Metherell in these Fairfax papers always seems to lead the way with health coverage. It happened again this morning with his interesting piece on how errors claim the lives of 4550 Australians a year, according to a report to the Government that urges sweeping reforms to the health system.

I thought that perhaps I should prepare a little check list on who are the most reliable and interesting journalists covering some of the specialist subjects and why not start with the environment. I would appreciate the comments of Crikey readers as to who I should be looking out for. You can post a comment below or send an email torichard@politicalowl.com if you would rather your views were kept a kept a little private.

The Rudd diatribes

I wonder if Kevin Rudd really thinks that he is some kind of gifted intellectual whose views merit lengthy discourses or whether he thinks that there is a political advantage in pretending to the people that he is some kind of intellectual by producing lengthy discourses?

Friday, 24 July 2009

Gair, Adermann, Bjelke-Peterson and Killen rejected

The dead poet has beaten the dead politicians for the honour of being given the name of Queensland’s new House of Representatives electoral division. For a second time a committee charged with drawing up the State’s electoral boundaries has recommended that the distinguished poet, Judith Arundell Wright (1915-2000) be given the nod. Back in 2006 the then-redistribution committee recommended Ms Wright’s name to the Australian Electoral Commission for a new division located in central and western Queensland. In its report out today the committee notes that following public objections, as a result of local issues at the time, the then-augmented Electoral Commission decided to change the name of the proposed new division while indicating that were it not for those local issues, there would have been no reason to change the name.

The Committee says it considered the circumstances surrounding that decision “and observed that the reason for not adopting the name of “Wright” in 2006 does not apply to the geographic area of the new proposed division. A number of individual suggestions and comments offered the name of “Wright” for the new division. Therefore the Committee proposes to name the new division “Wright” in honour and recognition of Judith Wright’s service and contributions to Australia as a social and environmental activist, and poet. The Committee also considers that “Wright” is an appropriate choice of name given Ms Wright’s association with the area in which the new division is located, particularly Mount Tamborine.”

Those beaten for the new electorate title included nominations for Adermann, Bjelke-Peterson, Chalk, Coulter, Fulton, Gair, Killen, Theodore, and Waters. Because the guidlines for naming divisions say that they “should be named after deceased Australians”, on this basis Coulter was not even considered. The singer Ricki-Lee Coulter, a Gold Coast resident, whose work includes the seminal meditation on working-class life in Australia Hell No (“Workin’ hard, two jobs, just to get by / Got a boss that’s makin’ my head fly’) and the lyrical, inspirational Sunshine (“Everything that I’ve been waiting for / is knocking at my door”) will just have to wait.

Ban the gnome. There’s a new Nazi crime trial heading for Nuremburg and the gnome is to blame. The city’s public prosecutor’s office is conducting an investigation into the legality of German artist Ottmar Hörl displaying a garden gnome in the window of his home. An anonymous letter complained about the golden little fellow giving a Hitleresque salute. Der Spiegel quotes spokesperson Wolfgang Träg as explaining to the German press agency DPA that the display of the symbols of organisations which are banned under Germany’s constitution — such as the Nazi party — is only lawful if the organisation is being overtly criticised. “We are currently deciding whether the case of the garden gnomes is as clear cut as placards with crossed-out swastikas.”

Young doctors

A little reminder this morning that Senator Bob Brown had a life before becoming an environmental activist in Tasmania. The good Greens Leader bobbed up on Radio 2UE in Sydney to give an expert opinion, as it were, on the death of Jimi Hendrix. On that fateful day some 39 years ago, the young medical graduate from Sydney University was working as a locum in the emergency department of St Mary Abbotts Hospital in South Kensington when the body of a well-and-truly dead Hendrix was wheeled in after a drug overdose. The reason for this walk down memory lane is the publication of a new book suggesting that Hendrix was in fact murdered but Dr Brown could cast no light on this allegation. But he did confirm that the story about himdisrupting a scene in a Richard Burton movie set at the same hospital was not an urban myth.

Who did he work for?

Kevin Rudd and his paid-for travels made the news this morning with details of a connection with a Taiwanese born Chinese sure to raise a few eyebrows and not just in Australia. Those nasty fellows in Beijing are also bound to be wondering even more than before about how helpful it is for them to have a Mandarin speaking Australian Prime Minister. The Rudd-Taiwan connection when he was out of political life briefly in the 1990s is surely what the press will be examining next. Who exactly did he work for as a China consultant?

Thursday, 23 July 2009

WA Premier not a Sheridan believer

The West Australian Premier Colin Barnett is clearly not a Greg Sheridan disciple. In China this week on a trade mission Mr Barnett has very conspicuously shied away from making any public protest about the imprisonment of Rio Tinto executive Stern Hu. On the day when the foreign editor of the national daily writes of how galling is “the needless and sterile pro-appeasement attitude taken by those quasi-academic commentators who dominate debate about China”, Premier Barnett has said raising the case of Mr Hu with his Chinese hosts was not appropriate. It is difficult to think of anything more pro-appeasement than that. I look forward to the serve he gets tomorrow!

Mr Barnett says Australia needs to continue encouraging Chinese investment in Australian projects and is banking his reputation on getting the multi-billion-dollar Oakajee Port and Rail project in the Mid West up as one of them.

I was encouraged with meetings with Oakajee Port and Rail that understandings have been reached with Chinese organisations about the design of the port and construction of railway,” he said this morning. “This is starting to bring China in, not only as an owner of an iron ore deposit but also very much as a participant in the whole development.”

In the mean time the Communist Government continues to assert that it has all the evidence it needs to prove that the Rio Tinto iron ore negotiator has broken Chinese law. Chinese foreign minister He Yafei told reporters yesterday that China has “sufficient evidence” that shows Rio Tinto executives stole state secrets.Mr He met with his Australian counterpart Stephen Smith in Egypt last week where the two discussed the case.

I stressed that we have sufficient evidence showing that the individuals involved obtained China’s state secrets using illegal means,” Mr He told reporters.

The case has entered into the judicial process and I requested the Australian side to respect China’s judicial sovereignty,” he said.

Not that appears to have been any immediate detrimental impact on the negotiations between Rio Tinto and other producers when it comes to the prices to be paid for Australian iron ore. The China Daily reported this morning that according to “industry experts”, the spot price of iron ore will climb in the second half of the year if the Japanese and South Korean economies recover, and this possibility may force China to accept the 33-percent discount in full-year ore rates now being offered by global miners.

The real reason now apparent

The real reason why Queensland had an early election is now apparent. The report into the Queensland police service by the Crime and Misconduct Commission would surely have been enough to turn Labor’s narrow victory into defeat coming so quickly after the criminal conviction of a senior minister for his own fund raising activities. The time has surely come for fixed term parliaments to put a stop to governments manipulating the elctoral timetable to their own advantage.

End the developer donations

As frank an admission this morning as you will ever read about the link between “paid favours in politics” and development approvals. Tucked away in The Australian was a first rate piece by Michael Owen quoting a prominent South Australian identity with almost 30 years’ experience in property development, warning of the influence of lobbyists within the Rann government, saying it is “the price you pay for getting developments through”, while lamenting the national trend of “paid favours in politics”.

The time has surely come to dramatically reduce the amount spent on election campaigns in this country and hence the need for this grubby fund raising business.

Wednesday, 22 July 2009

Quiet diplomacy gets its chance

The quietly diplomatic method of dealing with the Chinese Government about the accusations that Rio Tinto is a briber and corrupter persists because press and politicians alike can find out nothing new to talk and write about. Not that this should be taken as indicating that the Chinese Government is any less concerned about goings on in its iron and steel industry. The People’s Daily, the official mouthpiece of the Communist Party, this week wrote of several Chinese government departments, including the Ministry of Commerce and General Customs, launching investigations into the flow of imported iron ore on the market. The People’s Daily said:

Industrial insiders have been urging the government to take strong action to rectify the iron ore market after the Rio Tinto “spy” case was exposed.

China’s steel prices have been at low levels since they plunged in the fourth quarter of last year. Profits of iron and steel companies are under great pressure because of shrinking profits.

It is important for those companies to bring their costs down. However, Chinese steel makers are in a disadvantaged position in their negotiations with their iron ore suppliers, including Rio Tinto.

Speculation on iron ore imports leading to surging imports are blamed as the major reason for China’s weak position in those negotiations.

China’s monthly iron ore output jumped nearly 27 percent in June to 83.3 million tons, as demand for steel increased and prices rose.

There are 112 companies in China which hold import qualifications of iron ore, with 70 of them steel makers and 42 traders.

China’s steel industry will face bleak prospects of making profits this year following a 97.5 percent profit slump over the first four months of the year due to the industry’s overcapacity.

China’s crude steel production increased by nearly 1.2 per cent to 266.6 million tons in the first half of 2009 and reached 45.39 million tons in June.

If that continues, the annual production is expected to reach 552.2 million tons in 2009, up 10 per cent from 2008.

However, exports were significantly down. Export of steel billets, for example, shrank 97.6 per cent from January to April this year.