Sinosteel raises stake in Midwest

China imports iron ore for steel making from miners such as BHP Billiton

A Chinese state owned steel trading firm has snapped up a controlling stake in iron ore miner Midwest.

Sinosteel raised its stake in Australia's Midwest to 50.9% as it tries to secure supplies of iron ore - a key ingredient for making steel.

The Chinese firm has made a $1.4bn Australian dollars ($1.3bn; £681m) takeover bid for Midwest.

But analysts said any move by Beijing to take full ownership of Midwest will face opposition in Australia.

The news sent Midwest shares up 1.5% to A$6.50 ($6.29; 316 pence).

Secure supplies

Sinosteel originally made an offer for Midwest in January - the first ever hostile bid by the Chinese for an Australian company.

That deal was rejected but Sinosteel came back with a sweetened bid which was recommended by the Midwest board in May.

Sinosteel could face opposition from Midwest's other main shareholder Murchison Metals, which owns 10% of the company.

China, the world's biggest steel producer and consumer, produces no high-grade iron ore.

The deal with Midwest is part of a wider plan by Beijing to keep its booming steel industry well supplied with raw materials, analysts said.

"It is strategically important for a trading company in China to secure upstream resources," said Helen Lau, an analyst at Daiwa Research Institute in Shanghai.

The Chinese steel industry depends on two mining giants, Rio Tinto and BHP Billiton, for the majority of its raw materials.

Recently, steel mills in China have had to absorb price rises of up to 96% from the two firms.