News Room - Steel Industry

Posted on 11 Jun 2008

Chinese firms looking to build stake in BHP: report

Chinese steel companies are looking to join forces to take a significant stake in miner BHP Billiton Ltd/Plc (BHP.AX: Quote, Profile, Research) (BLT.L: Quote, Profile, Research), the Sydney Morning Herald newspaper reported on Wednesday.

The paper quoted an official connected with the China Iron & Steel Association as saying that Baosteel (600019.SS: Quote, Profile, Research), Wugang and Angang (0347.HK: Quote, Profile, Research) 000898.SZ hoped to come together to invest in BHP, in a deal likely to be financed by the China Development Bank.

"Organizing this is not easy," the official added.

China Development Bank funded a purchase in March by aluminum producer Chinalco of a 9 percent stake in Rio Tinto Ltd/Plc (RIO.AX: Quote, Profile, Research)(RIO.L: Quote, Profile, Research), subject of a $170 billion takeover bid from BHP.

Chinese steel companies are concerned that if a merger between Rio and BHP did go ahead it would further entrench the stranglehold the two have on the global iron ore market. Industry sources said on Tuesday that Chinese small steelmakers would accept a 95 percent price hike in annual iron ore prices by Rio Tinto, though the bigger firms are seen holding out for a better deal.