News: Iron ore glut seen easing path to China nod for Vale-Fortescue tie-up

• Top consumer China thwarted previous iron ore tie-ups
• Fortescue-Vale proposal seen unlikely to face MOFCOM hurdle
• China may want stronger Fortescue - legal expert

How times have changed. In 2008, when top global miner BHP Billiton (BHP) tried to take over iron ore rival Rio Tinto , China raced to snap up a $14 billion stake in Rio, to block the deal and thwart any tightening of iron ore supplies.

Two years later, Chinese regulators helped nix a $116 billion iron ore joint venture between the two giants.

Now, faced with an iron ore glut and a struggling steel industry, Beijing is expected to take a kinder view of a proposed tie-up involving the world's largest iron ore miner, sources say.

Brazil's Vale and Australia's Fortescue Metals Group (FMG) this week announced they are in talks over a joint venture to blend up to 100 million tonnes of their iron ore - about 10 percent of China's imports of the steel-making ingredient.

"It is quite likely that this will go through without conditions. The industry is much less sensitive right now," an antitrust expert with knowledge of the Ministry of Commerce's (MOFCOM) merger review process said.

The person, who declined to be named while speaking on a government matter, said the slump in iron ore prices had made it less controversial for China, which consumes about half the world's seaborne iron ore. Iron ore prices, while off their lows, are still down some 70 percent from highs touched in 2011.

MOFCOM, contacted by Reuters, said it had not received any application from Vale or Fortescue. It did not comment further.

China's steel mills, which vehemently opposed the proposed merger of BHP and Rio Tinto's iron ore businesses in 2010, appear to favour the would-be Vale-Fortescue alliance if it goes through - hoping for quality at low prices.

The chairman of Hunan Valin Iron and Steel Group, which is a 14 percent shareholder in Fortescue, said the ore blending joint venture would benefit it as both shareholder and customer.

"I feel that this is a good thing for China," Hunan Valin Chairman Cao Huiquan said in Beijing, on the sidelines of China's parliament.

STRONGER SUPPLIERS While some experts say China’s regulators have become more proficient in analysing and processing cases since the 2008 implementation of anti-monopoly laws, critics say antitrust rulings are still used to support critical domestic industries or drive industrial policy.

A more sanguine response from MOFCOM on the Vale-Fortescue proposal would be consistent with a lesser emphasis on resources than previously.

"It’s hard to see this as a very objectionable case," a China-based antitrust lawyer said.

After years of investing billions buying iron ore assets and backing Fortescue as a foil for the world's mega producers of iron ore, China would be loath to see Fortescue crumble under the weight of its $6.1 billion in net debt.

The government may see the alliance as a way of strengthening Fortescue, said Mark Williams, a University of Melbourne law professor specialising in China competition law.

"They may take the view that it provides a suitable counterweight to Rio and BHP," Williams said.

In a possible indication of which way MOFCOM will lean, Beijing last year unexpectedly cleared Royal Dutch Shell's takeover of BG Group , with no strings attached.

That was in contrast to 2013, when Swiss-based trading giant Glencore took over Xstrata in the world's biggest mining deal. MOFCOM required Glencore to sell off some copper assets, including the $5.7 billion Las Bambas mine in Peru, even though neither company had mines in China.

China-backed MMG Ltd <1208.HK> bought Las Bambas. Williams warned, though, that other state agencies - such as the powerful National Development and Reform Commission - could still weigh in on the Vale-Fortescue proposal.

"Where you have such a large state involvement in the steel sector, it's almost inevitable that the other government agencies that have economic or industrial responsibilities will have an input into the ultimate decision."

	<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 
Big Four miners' margins	http://tmsnrt.rs/1LQmoH4 

	^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>