It doesn’t take a genius to see China’s been on a resources-gobbling tear. It pines for mines the way a drug addict fiends for methadone. So no wonder it has its eye on Rio Tinto Group. But so does BHP Billiton, which is brandishing a cool $134 billion. Does China have that kind of lumber to compete? Sure it does (somewhere) but first its steelmakers, which consume more iron ore than anyone else in the world, have to a) unite and b) block BHP’s bid. Can it be done? The market, for one, has already cast its vote.

Chinese steelmakers, the largest buyers of iron ore, and the government are studying a joint bid for Rio Tinto Group to counter a $134 billion offer from BHP Billiton Ltd.

``It's an issue being discussed by top-level officials,'' said Chen Hanyu, a director at the resources office of Beijing-based Shougang Corp., the nation's ninth-largest steelmaker. Members of the China Iron and Steel Association have held talks, said Vice Chairman Qi Xiangdong.

The steel mills want to block BHP's offer because the deal would give the world's biggest mining company control of almost half the Asian market for iron ore. Rio shares closed lower in Sydney trading, reflecting doubt that China will proceed with an acquisition that would dwarf Cnooc Ltd.'s failed $18.5 billion bid for Unocal Corp., rejected by U.S. lawmakers in 2005.

``There are clear strategic reasons why they would consider'' a bid, Angus Gluskie, who helps manage the equivalent of $500 million at White Funds Management, including Rio and BHP shares, said in Sydney. Australia's newly elected Labor Party government may oppose such a transaction, he said.

China has been scouring the world for resources. Aluminum Corp. of China bought Peru Copper Inc. for $860 million in August, Anshan Iron & Steel Group in Sept. agreed to a A$1.8 billion ($1.6 billion) Australian iron ore joint venture, and Cnocc last year spent $2.7 billion buying Nigerian oil fields.

A bid ``is pretty positive for China's steelmakers,'' said Yan Ji, an investment manager at HSBC Jintrust Fund Management Co. in Shanghai. ``The control of raw material costs makes sense.''

Baosteel Group Corp., the nation's largest steelmaker, and domestic rivals are studying a bid…

(Continue reading on Bloomberg).

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