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People's Daily Online>>China Business

Metals index to reflect big picture of industry (2)

By Du Juan (China Daily)

14:38, February 08, 2012

Major merger

In addition to rising costs and lower selling prices, Chinese companies face new monopolies in the global mining industry, which could weaken their pricing power.

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

Each Xstrata share would be equal to 2.8 shares of Glencore's for its shareholders. Xstrata would own 45 percent of the new company's shares, it said.

The merger would create a new monopoly in the global mining sector, said Wang Huajun, deputy secretary-general of the association, on Tuesday. He said Chinese companies needed to work harder on their development to gain more global influence rather than worry about the influence of the merger.

The deal would weaken the power of Chinese buyers in the downstream segment of the mining industry, said an industry insider who declined to be identified.

He said Glencore had direct and indirect cooperation with 40 percent of the aluminum companies and more than half of the zinc companies in China.

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

Glencore has many Chinese partners including PetroChina Co Ltd, China Petroleum & Chemical Corp, Aluminum Corp of China, Shenhua Group Corp Ltd and China Minmetals Corp, which are all major players in natural gas, coal and metal.

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

Glencore already owns 34 percent of Xstrata.

The merger - the largest ever in the mining sector - will result in a global commodity giant with a market value of $80 billion.

Glencore went public in May 2011 in London's biggest-ever IPO, worth about $10 billion.

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