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China says steel talks on

SHANGHAI, July 13 – Strained price negotiations between China\’s steel mills and iron ore producers are continuing, a Chinese official said Monday, despite Rio Tinto\’s lead negotiator being arrested on spy charges.

The China Iron and Steel Association, which represents Chinese mills in the talks, said the negotiations had not been suspended after Rio Tinto executive Stern Hu, who represented producers, was arrested last week.

"It\’s still underway," a steel association official told AFP on condition of anonymity due to the sensitivity of the issue.

China\’s foreign ministry last week said it had proof Hu, an Australian national, and three Chinese Rio Tinto colleagues stole state secrets, endangered national security and caused China to suffer huge economic losses.

Security officials, in a statement published by China\’s state-run media, accused Hu and the others of plying Chinese steel executives with bribes in exchange for industry information.

Australian Foreign Minister Stephen Smith said the Chinese government had confirmed Hu\’s detention on July 5 was linked to the iron ore talks.

When asked who would represent Rio Tinto at the talks in Hu\’s absence, another steel association official declined to comment, saying any discussion of the talks required high-level approval.

Rio Tinto spokesman Gervase Green said it was company policy to not discuss the talks.

The talks between Chinese mills and Rio, the world\’s third-largest miner, to set iron ore prices for the coming year, missed a key deadline on June 30.

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Last week, China Business News, a Shanghai-government linked financial newspaper, reported after the detention of the Rio employees the association had accepted the same 33 percent price cut Rio had set for other Asian mills.

China entered the negotiations, demanding at least a 45 percent price cut, although both iron ore and steel markets recovered this year partially on hopes for improved demand from China.

However, state-run economic magazine Caijing reported in the days leading up to Hu\’s arrest that the steel association had had no substantive discussions with the three global miners — Rio Tinto and BHP Billiton of Australia and Brazil\’s Vale — since mid-June.

Rio has said it was not aware of any evidence against its four employees whose arrests have cast a shadow over one of Australia\’s most important trade and diplomatic relationships.

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