But skyrocketing iron ore prices in international markets have dampened the prospects for Chinese importers. The average price of China's iron ore imports edged up 71.5 percent, 19 percent and 9.5 percent year on year in 2005, 2006 and 2007, respectively. And the recently concluded iron ore price talks between China and Australian miners had forced through a whopping 96.5-percent price rise on Chinese imports from Australia.

Concern about a possible BHP Billiton-Rio Tinto merger also compelled Sinosteel to speed up its plan to acquire Midwest. BHP Billiton had made clear its intention to pursue Rio Tinto early on, even though its previous proposals had been rejected twice. Because the two giants currently account for almost 40 percent of the world's iron ore production, Asian and European steelmakers have opposed their merger, fearing that it would create a behemoth that could monopolize global iron ore supplies.

Sinosteel was not alone in its efforts to lock in Australian resources. On February 1, Aluminum Corp. of China (Chinalco), the country's largest aluminum company, teamed up with American aluminum producer Alcoa Inc. to acquire a 12-percent stake in Rio Tinto. The move was reportedly designed to block BHP Billiton's proposal to buy Rio Tinto.

Why hostile?

Sinosteel's acquisition bid was not hostile at first. Last December, it made an initial cash bid for Midwest at a price of AU$5.6 ($5.4) per share, which valued the target at AU$1.2 billion ($1.16 billion). Midwest, which at the time was under a takeover attempt by Murchison, had solicited an offer from Sinosteel. With Sinosteel as its white-knight bidder, Midwest scuppered Murchison's offer, but then unexpectedly turned against the Chinese.

On February 20, Midwest rejected Sinosteel's offer, alleging that the bid undervalued its future prospects and demanded the Chinese company raise its bid price by 25 percent. Disappointed with the situation, Sinosteel took its bid directly to Midwest's shareholders on March 14 and sweetened its cash offer to AU$6.38 per share. This move won support from Midwest's previously reluctant board.

Observers said Sinosteel at that time had been cornered into a hostile bid out of fear that its interest in the joint ventures with Midwest might suffer if the bid fell apart. Alan Young, head of JP Morgan's Australian arm and Sinosteel's adviser on the deal, told Reuters that Sinosteel was forced to bypass the board and appeal directly to its shareholders, because it was clear that Midwest was not being run in the best interest of all shareholders.

Sinosteel had no alternative but to fight the protracted bidding war to a finish, Yu Tiecheng, Chairman of Shanghai Tide Investment Consulting Co. Ltd., told the 21st Century Business Herald.

"It pays to gain a controlling stake in Midwest, which has potential to boost its iron ore reserves," Yu said. "But Sinosteel may be challenged in subsequent integrations, because the hostile bid may leave Midwest's employees averse to the Chinese side."

Not always easy

It is widely believed in the industry that Sinosteel's success will prompt other Chinese companies to follow suit. But some say they will continue to encounter problems when they pursue overseas investments. After Chinalco bought Rio Tinto, Australia's Foreign Investment Review Board