Friday, March 07, 2008

China steel mills too slow to take Rio stake -exec

China's state-owned steel mills considered taking a spoiling stake in Rio Tinto to block a bid by BHP Billiton, but abandoned the plan after Aluminum Corp of China beat them to the punch, the head of the country's fourth-largest mill said on Tuesday.

Chinalco and Alcoa stunned markets by scooping up 12 percent of Rio Tinto's London-listed shares in late January, forcing BHP to raise its offer for the rival Anglo-Australian miner.

Rio says the BHP offer is still too low.

The China Iron and Steel Association (CISA) had tried to arrange a similar move by its member mills late in 2007, but the state-owned mills were unable to coordinate a purchase and get Beijing's approval quickly enough, said Deng Qilin, head of Wuhan Iron and Steel Group and its listed unit.

"Before Chinalco bought in there was that thought, but it's like a long distance race ... The one who races ahead gets the prize," Deng told reporters in Beijing.

"Everything happened so fast at the end of the year. A state-owned enterprise (SOE) is not a joint venture or a private company; an SOE is controlled by the state and its decision-making process is relatively slow."

Chinalco and Alcoa spent $14 billion for their stake and retained the option to buy as much as 14.9 percent of Rio Tinto's London shares by the end of February.

"I don't see any further moves by other Chinese companies at the moment. At the moment there are no plans," Deng added.

The CISA plan was complicated because no single steel mill would have been able to make the investment by itself and none could act independently, Deng added.

"If an SOE wants to invest a few million yuan, or a billion, it can decide for itself. But this would have been over 100 billion yuan ($14.1 billion) and would have needed government approval. It was a long process, and it wasn't so easy."

Unlike the steel companies, Chinalco, the parent of Chalco, controls more than half of China's aluminium sector, giving it more heft and independence.

But Deng said that while the BHP-Rio merger would raise iron ore costs and price dominance -- the two companies account for about 40 percent of China's iron ore supply -- he still expected it to ultimately go through.

"I think they will succeed - this is a commercial move," he said.

No comments:

Enter your email address:

Delivered by FeedBurner