It is reported that China’s steel industry was less than thrilled to wake up yesterday and find it might soon be wrestling with two giant iron ore suppliers rather than three in the tightest iron ore market the modern world has seen.

A spokeswoman for Shougang said that "Of course a merger will have an impact on the iron ore price negotiations the Asian market will be monopolized by one company." She however added that her company is not particularly concerned because prices would ultimately be set by supply and demand, and Rio and BHP both plan to rapidly increase production.

Mr Chen Xianwen heads of the iron ore department of China Iron and Steel Association however said that he is not concerned because the takeover is not yet a reality. He said “It would be dishonorable for BHP to break the price negotiating framework after it proposed a more transparent mechanism for trading iron ore.”

A Wuhan official is reported to have said that "We can do nothing to stop any merger and we will have to just stand by and watch. If it comes out that they have iron ore assets to sell, the price would be unaffordable for a Chinese mill. The idea that we might benefit is unrealistic.”

Sinosteel is reported to have said that “The merger will face many obstacles. Firstly, the Japanese own stakes in the Australian mining projects and they won’t agree because it won’t benefit them. But shares are too highly priced for Chinese mills to take a controlling position. Only the country could afford to buy a big enough stake to block the merger."

However, a Laiwu official admitted that in view of Mittal Steel's takeover of Arcelor, anything is certainly possible.

The China Metallurgical Mining Association said that the merger would be difficult. It said “Talks have been prevailing in the market for a long time, but the possibility of realizing the merger is limited.”

Meetings to begin negotiating next year's iron ore benchmark price are scheduled for the end of this month. Analysts now predict prices could rise as much as 50% after steep rises in each of the past five years.