The Chinese government may cancel more than 20 companies' iron ore import licenses if it finds that they have conducted illegal speculative purchasing, sources reported Tuesday.

Insiders said China Iron and Steel Association (CISA), which regulates the iron and steel industry, and the Ministry of Commerce have begun a joint investigation into the issue.

Most of the 20 firms are distributors. Currently, 112 steel mills and distributors have iron ore import licenses.

"Large state-owned enterprises may not have trouble but those small private enterprises may be among those being disqualified," said an insider.

Four employees of the Australian iron ore supplier Rio Tinto were detained on July 5 in Shanghai on charges of espionage and some executives at Chinese steel mills who are suspected of involvement in the case are also under investigation.

Speculative purchasing is the buying of commodities like iron ore in order to resell them later when prices have increased, rather than selling them at market prices for internal consumption. It often inflates the price of a particular commodity because it artificially increases the demand for it.