BHP, China battle in minerals market
TEXT OF STORY
Doug Krizner: Shares in the world’s largest miner, BHP Billiton, are down sharply in London this morning. The company’s profit fell for the first time in more than five years.
But a bigger concern is BHP raising its bid to buy rival Rio Tinto — that offer is now $147 billion. BHP may have had no choice, especially since China’s taken an interest in Rio. Marketplace’s Scott Tong reports from Shanghai.
Scott Tong: BHP Billiton has courted Rio Tinto for months. In November, it offered 13 percent less than today, to which Rio said: “Come back with a real diamond.”
Today’s sweetened offer may spark serious talks. BHP says a deal brings economies of scale and efficiencies — more minerals to market faster.
But buyers like China fear a supplier gang-up: monopoly pricing. Industry consultant Michael Kamesaroff:
Michael Kamesaroff: The Chinese are smarting under the fact that iron ore prices have doubled over the last couple years. They’re probably annoyed at it, in the same way you and I are annoyed every time we pull up at the petrol pump and see the price of fuel.
Last week, Chinese state-owned Chinalco bought a $13-billion stake in Rio, the largest Chinese acquisition to date.
Some think Chinalco wants to scuttle the deal. Others say it’s simply bought a seat at the table, just in time for the talks to begin.
In Shanghai, I’m Scott Tong for Marketplace.
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