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Federal minister for foreign affairs Stephen Smith revealed last night in a press conference that Australian officials were told by Chinese authorities Hu was being detained as a suspected spy.

Australian officials are continuing to seek access to Hu as well as the details of the reasons why he is being detained.

Smith said he had seen no evidence that Hu’s detention had anything to do with “commercial matters” between Rio Tinto and China over iron ore pricing.

However, the minister said the reasons given for Hu’s detention came as a surprise to the Australian government and to Rio Tinto.

Three other Rio employees, who are residents of China, are also being detained.

Despite Smith’s statement, it has been widely speculated in Australia that the incident is linked to the fraught nature of this year’s iron ore pricing negotiations between Rio Tinto and Chinese steel mills.

Today, the Australian Financial Review quoted unnamed Chinese sources as saying the detention was part of a wider review into kickbacks between steel mills and iron ore companies.

According to Australian National Party Senator Barnaby Joyce, Rio has been targeted because it spurned the advances of Chinese state-owned company Chinalco in favour of an iron ore tie-up with BHP Billiton.

Today the Labor party called Joyce’s statements “grossly irresponsible”.

Yesterday rumours emerged that the Chinese mills had settled prices at around 33% lower than last year’s benchmark, but the rumours have not been confirmed by any of the major iron ore miners, including Rio or BHP Billiton.