It is not very surprising that China’s steel makers have bristled at the news that mining giant BHP Billiton has put in a $150 billion bid for rival Rio Tinto. In case the mega acquisition goes through, the new combined entity will control 27% of the world’s supply of iron ore.
Such consolidation usually leads to higher prices. China will feel the pinch, thanks to its voracious appetite for iron ore. Its government may push one of the country’s large steel makers to make a counterbid for Rio Tinto. There are also reports that China’s competition regulator may write new rules to restrict the merged company’s business in China.
Indian steel makers, too, have been worried about getting access to iron ore and have lobbied for restrictions on exports of “our” ore to China. The new takeover bid shows that more than protectionism is needed to secure iron ore supplies.