Merger brings new monopolies for mining firms

Updated: 2012-02-07 20:39

By Du Juan (

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BEIJING - Chinese companies will face new monopolies in the global mining industry and it will possibly weaken the pricing rights of the domestic traders, said officials when being asked to comment on the recent merger of Glencore International AG and Xstrata PLC.

Switzerland-based Xstrata, the world's fourth-largest metals and mining company, announced on Tuesday that it will form a new company named Glencore Xstrata International PLC, together with Glencore, the world's largest publicly traded commodities supplier.

Xstrata's each share will equal to 2.8 shares of Glencore's for its shareholders. Xstrata will own 45 percent of the new company's shares.

On February 2, Xstrata announced that Glencore approached the company for an all-share offer in a "merger of equals."

The deal's success will weaken the power of Chinese buyers in the down-stream part of the mining industry, said an industrial insider who declined to be named. He said Glencore has direct and indirect cooperation with 40 percent of the aluminium companies and more than half of the zinc companies in China.

"The industry chain cooperation between the two companies will have significant influence in a long term in the Chinese market, the world's major commodities consumer," he said.

The merger will form new monopoly in the mining sector, said Wang Huajun, deputy secretary-general of the China Nonferrous Metals Industry Association.

However, Wang (he) said Chinese companies need to work harder to develop themselves to gain more power in the international market rather than worrying about the influence of the merger.

Glencore has many Chinese partners including PetroChina, Sinopec Group, Aluminium Corporation, Shenhua Group, China Minmetals Corporation, which are all major players in gas, coal and metal industries.

Glencore already owns 34% of Xstrata. The merger will result in a global commodities giant with an $80 billion market value, which will be the biggest merger in the mining sector in the history.

Glencore went public in May 2011 in London's biggest-ever initial public offering, worth roughly $10 billion.

Xstrata has a market capitalization of about $50 billion.