Chinese efforts to gain influence over a vital commodity have come to naught
THE offer that BHP Billiton, a mining conglomerate, made in mid-October to buy United Minerals, a prospecting firm with operations near BHP’s iron-ore mines in the Pilbara region of Australia, came with one notable string attached: United must abandon plans to sell an 11% stake to China Railway Materials Group, a state-owned Chinese firm. If United’s shareholders accept the A$204m ($187m) BHP is proffering, as their managers recommend, it will mark another defeat in the Chinese government’s concerted but largely fruitless campaign to gain more influence over the market for iron ore.
The wares of Western mining giants, especially iron ore, are vital to the vast infrastructure projects that are transforming China. The government is nervous about this dependence, especially because just three firms—BHP Billiton, Rio Tinto and Vale—dominate the international trade in iron ore. So China’s government, acting through state-controlled companies, has been trying to overturn this oligopoly by encouraging Chinese customers to negotiate purchases in unison, by hunting for alternate supplies and even by buying a stake in Rio, all to little effect. …




