Metal Products News
- Baosteel denies bid plans for Rio Tinto
Date: 7-Dec-2007 Sources: (Shenzhen Daily)
BAOSTEEL Group Corp., China's biggest steelmaker, has doused speculation it was planning to spoil BHP Billiton's takeover bid for Rio Tinto with an offer of its own, saying it lacks the financial muscle.
In an interview with the Shanghai Securities News published Thursday, Baosteel chairman Xu Lejiang denied an earlier local media report that he had expressed interest in mounting a rival bid.
'I did not say this. It is a fabrication of the media,'Xu told the newspaper.
On Tuesday, the 21st Century Business Herald had quoted Xu as saying Baosteel was considering a bid of at least US$200 billion for Rio Tinto.
BHP Billiton, the world's largest mining firm, has approached Rio Tinto with a US$125 billion all-share takeover proposal. Rio chief executive Tom Albanese has rejected the proposal as too low.
Chinese ownership of such a powerful Australia-listed company - Rio accounts for 3.2 percent of the S&P/ASX 200 share index - could ignite a political firestorm for Australia's new Prime Minister, Kevin Rudd, who has promised to create jobs at home and keep the economy bubbling.
'I couldn't see Baosteel having a snowflake's chance in hell of getting past an Australian foreign investment review,'said Fat Prophets mining analyst Gaven Wendt.
Australia has been happy to allow smaller mining companies to fall into foreign hands, but has been protective of its few corporate behemoths, blocking a takeover of oil company Woodside Petroleum Ltd. by Anglo-Dutch energy group Shell in 2000, citing national interests.
BHP was only granted approval to merge with South Africa's Billiton a year later after giving assurances it would keep its headquarters and a stock listing in Australia.
BHP's overtures towards Rio Tinto are causing tremors among steelmakers who rely on both companies for hundreds of millions of tons of iron ore each year. They fear losing what little clout they have in determining prices if the two forces merge.
Whistle-stop meetings by BHP's chief executive, Marius Kloppers, with steelmakers in South Korea, Japan and China last month aimed at shoring up customer support for a merger on the grounds it will simplify distribution channels did little to calm concerns of a future mega ore supplier emerging.
A combined BHP-Rio would hold about 27 percent of the world market for iron ore. It would also control the global flow of coal, copper, uranium and diamonds.
Steelmakers have called for competition regulators to block any merger. Chinese steel mills have gone as far as asking the Chinese Government to set up a national iron ore reserve.
Baosteel is almost entirely dependent on imports of iron ore, largely from Australia, with lesser tonnages coming from Brazil, India and elsewhere.
There has been speculation that Baosteel, perhaps in partnership with other domestic steelmakers, might bid for Rio Tinto to secure supplies of iron ore.
Xu said a BHP-Rio Tinto merger might end up limiting production to support the price of iron ore, but he said Baosteel did not have the means to mount a counter bid.
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