International Investing

WSJ article on the merger of BHP and Rio Tinto:

If you want to understand how the great flows of people and material will shape our future, it’s essential to understand BHP Billiton’s $132 billion unsolicited offer for Rio Tinto. The Anglo-Australian mining companies are the world’s first- and third-largest by market capitalization, which combined would have a firm hand in iron ore, coal and copper, pulled across 154 separate mines from Madagascar to Michigan.
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The coupling would nonetheless be unprecedented, giving it control over 40% of the world’s seaborne iron-ore supply and over one of every three pounds of uranium, says Mr. Robson. When the two companies discussed merging their iron-ore operations back in 1999, one official in Western Australia snapped that the two were “essentially monopolizing the production of iron ore.”

Who has the resources to challenge the power of this new quasi-country? Only a real country. It’s called China. On Feb. 1, state-backed aluminum company Aluminum Corp. of China staged a “dawn raid” to purchase nearly 10% of Rio Tinto’s shares in the open market, along with Alcoa of the U.S. China’s intentions still remain inscrutable. It’s possible that it hopes to squeeze assets from a successful BHP-Rio combination. It may hope to use its blocking stake as a tool for negotiating commodity prices.