Chinese competition authorities may reject BHP bid for Rio

02 August 2008

Mumbai: The Chinese authorities are likely to reject BHP Billiton's $177 billion takeover bid for Rio Tinto Group as it would create an iron ore monopoly along with Vale, the China Iron and Steel Association said.

China's ministry of commerce is reviewing anti-trust issues of the takeover bid, following concerns raised by the association, Luo Bingsheng, vice chairman of the group, said.

''BHP Billiton, Rio Tinto and Brazilian miner Vale already have a monopoly on the global market, and if two of them get merged, things will certainly get worse,'' CISA deputy chairman Luo Bingsheng wrote to the commerce ministry.

He said CISA has also made a submission to the European Commission, which also sought the opinion of Chinese steel makers on BHP's $177 billion hostile bid for Rio.

Chinese steel producers, already hurt by a doubling of iron ore prices, want to block the merger as the deal would create the world's biggest mining company having control of almost half the Asian market for iron ore.

For China, the world's largest steel producer and iron ore importer, there are also political and commercial risks as such a takeover may affect its long-term interests with its major trading partner, Australia.