Chinese state owned steel maker Shougang is probably taking directions from their political masters to lock up Western Australian Iron Ore assets in communist government hands. Looks like this deal might fall through:
The deadline for the finalisation of the funding agreement has been extended repeatedly since its original deadline of September last year. Australasian had given its Chinese partner until June 30 to finally reach an agreement, but it is understood China was pushing hard to take control of the company through the purchase of a significant chunk of Mr Palmer’s stake.
Australasian said yesterday that it was aware Mr Palmer had recently held discussions with Shougang over the potential sale of part of his shareholding, but that no agreement was reached.
Mr Palmer is fast emerging as a significant independent player in the Pilbara region and is likely to be high on China’s radar as an alternative source of supply following news of the $US116 billion ($145bn) iron ore joint venture between Rio Tinto and BHP Billiton.
The other key player in the Pilbara, Andrew Forrest’s Fortescue Metals Group, is closely aligned with China through its $645 million share deal with state-owned Chinese steelmaker Hunan Valin, which now has a 17.5 per cent stake in Fortescue.
Part of the problem is the lack of a clear signal from Canberra over their acceptance of foreign government control of strategic assets. The Coalition should introduce legislation outlawing a foreign government and their associated businesses from controlling businesses in Australia beyond a certain asset threshold. This type of regulation would have a greater impact on China’s economy than any trade we currently have with them. China still needs iron ore and would be forced to scale down their ownership ambitions in the Pilbara region. They might even consider privatising some of their government business enterprises, which would be a win for the free market and in the long-term democracy ambitions in China.