Baosteel considers organizing counter-bid for Rio Tinto

Move would put Rio Tinto in the hands of China’s steel industry

By Maria Varmazis -- Purchasing, 12/4/2007 2:20:00 PM

A conglomerate of Chinese steelmakers led by Chinese giant Baosteel are considering a counter to BHP Billiton’s $134 billion bid for London-based iron ore provider Rio Tinto.

Baosteel Chairman Xu Lejiang told a Chinese business newspaper as reported by Reuters that $200 billion is probably not enough and the price tag for Rio Tinto would have to be higher.

As Chinese steelmakers are the world’s largest buyer of iron ore, analysts see the potential bid as a strong strategic move to prevent mining giant BHP Billiton of Australia from controlling “almost half of the Asian market for iron ore,” says one Bloomberg report. 

A Chinese buyout of Rio Tinto would be “pretty positive for China’s steelmakers,” says Yan Ji, investment manager at HSBC Jintrust Fund Management in Shanghai. “The control of raw material costs makes sense.”

For more on the possible acquisition of Rio Tinto, read previous Purchasing coverage here:

Rio Tinto rejects acquisition bid from BHP Billiton

World steel opposes Rio Tinto, BHP Billiton marriage