Want to watch some really big power play ? Witness this. The world's biggest mining company BHP Billiton has just sweetened its bid for its rival Rio Tinto. If the bid goes ahead it will be the second biggest takeover the corporate world has ever seen, and will mean a third of the world's supply of good quality iron ore is owned by one business. Iron ore is a fundamentally important raw material in the global economy. As grain is to hunger, so iron ore is to industrial production, particularly in the blazing economies of the Far East.
Now, who is the world's largest consumer of iron-ore and its eventual product, steel ?
Correct, it's China. And who would be worried most about the concentration of so much mineral access in one BHP/Rio conglomerate? Correct again, it's China. Or, who would want to ultimately control that vast mineral power ? Ok, that's enough correct answers.
And so, the Chinese government, through its proxy aluminium maker Chinalco, teamed up with the US aluminium giant Alcoa to buy a 9% stake in Rio Tinto for $14.05bn. The deal was done overnight last Thursday, which avoided leaks which could have alerted the market to their plans and giving BHP no time to respond. China in particular has no wish to see an increase in the price of one of its vital raw materials, and the move was the largest single overseas investment by a Chinese company ever.
And where's there's that kind of money and motivation for one deal, there's plenty more finance for plenty more action. China is also beginning to adopt the international financial advisers and public relations panoplies that the businesses of the older economies have been using for years, to ease its way into the world markets.
Yesterday we got the latest signs of slowdown in one of those mature industrial giants, the United States. It will be worth watching this takeover saga for how the young giant begins to flex its financial might and continue the long march of snapping up stakes in high profile assets across the world.
Posted by Michael Wilson, Business Editor
Well what a [Bad] world we live in as reality begins to bite the biggest of consumers of such vast minerals.
China has long been accustomed to practices otherwise perceived to be unjust, however, even taking that into consideration, the creation of one massive conglomorate to provide the world with iron ore cannot be in the interest of competitive markets, and as such perhaps world trading authorities might wish to ask [Michael Jackson] what is the best way to sustain costs whilst ensuring continual supply of many an ore.
Posted by: Khalid 6 Feb 2008 11:40:22