The previous week, BHP Billiton finally abandoned the acquisition of Rio Tinto due to failure in maximizing shareholders' interests. This brought the largest acquisition case in the global mining field to a hasty end.
Although China's steel industry can take a sigh of relief regarding the security of iron ore supply, it has paid a cost of about 90 billion yuan. We cannot help but admire BHP Billiton's decisiveness, and its greater success lies in dragging the world's largest iron ore buyer, China, into the situation.
At the time when prices for global commodities were rising, the perfectly timed proposal of the "BHP-Rio" merger intensified market expectations of higher iron ore prices. As a result, China's steel industry purchased 90 million tons of "high-priced" iron ore, with possible final impairment losses reaching over 35 billion yuan. In order to prevent the successful merger of "BHP-Rio" from threatening China's industrial security, Chinalco invested in Rio Tinto and became its largest single shareholder. The 14 billion US dollars investment resulted in an unrealized loss of 8 billion US dollars (approximately 54.4 billion yuan). Adding these two items together, China has already paid a cost of about 90 billion yuan for the "BHP-Rio merger".