Just what did Marius Kloppers, BHP Billiton's chief executive officer, tell customers during his tour of Asia in November? On his return to Australia, he said that he had discussed their "concerns" about uniting BHP Billiton and Rio Tinto and would continue to do so.
If he succeeds in persuading any of them that his audacious proposal is good news, he will deserve a new job explaining the benefits of Christmas to turkeys.
Steelmakers the world over are profoundly nervous about BHP's proposal, which would leave the iron ore market dominated by just two companies one Anglo-Australian, and the other, Vale, Brazilian.
The European Confederation of Iron and Steel Industries (Eurofer), the increasingly vociferous lobby group, says it will fight the proposed merger even though Australian iron ore accounts for a tiny percentage of supplies to the European Union.
But it is Asian customers who have the most to fear, as they are the most reliant on Australian iron ore. Australia's share of the Japanese, South Korean and Taiwanese iron ore import market is about 60 percent; in China, it is about 40 percent. Japanese and Korean steelmakers have publicly aired their concerns, but it is the Chinese, whose booming steel industry has inflamed iron ore prices over the last five years, who are most worried, though less demonstratively. In the weeks following the announcement of BHP's takeover bid, there were only muted statements of concern out of Beijing.
The Chinese already face a tough time negotiating with their suppliers on 2008 benchmark prices. Chinese demand is still booming and the spot market is facing an unprecedented boom. Talk of a 50-percent increase has become so commonplace that anything less will be seen as a decent settlement, so the Chinese are perhaps wary of throwing a tantrum, preferring to remain on relatively polite terms with their negotiating partners.
Presumably Kloppers explained to Chinese steelmakers that his bold move for Rio is less about boosting pricing power and more about the efficient use of infrastructure in the Pilbara region of Western Australia, where the two companies' iron ore resources are centered. If we merge, he may have said, we will be in a better position to get Australian ore from the ground and onto ships bound for China. We will be able to supply you with bigger quantities of better ore.
But the idea that BHP will be content to lift volumes and avoid trying to flex its increased bargaining muscle seems an unlikely proposition.
In Western Australia, observers are concerned not only about putting a fat slice of the state's iron ore in the hands of one company, but also about upsetting a major trading partner. "The market is not going to be like this forever," a source in Western Australia said, implying that it would be bad practice to squeeze everything out of "our Chinese partners" just because the going is good now.
Whether China will be able to do anything to halt the BHP-Rio deal, even if its decides to, is uncertain. Rumors that one or more Chinese companies might step in to make a counterbid for Rio refused to die throughout November, despite denials from China Investment Corp. (CIC), the body charged with spending China's massive foreign exchange reserves.
But even if CIC or a Chinese steelmaker such as Shanghai Baosteel Group does bid for Rio, would it succeed?
For one, the political implications of such an intervention would be huge and double-edged. How would Australia react to Chinese attempts to move in on a flagship national company? And how would China's divided steel industry share the spoils?
Beijing doesn't appear to have any legal avenues to explore. Whereas Eurofer can make its opposition felt through the sophisticated legal artillery offered by the European Union, China has no such recourse.
In the long run, and for all sorts of reasons aside from the immediate prospect of supplier consolidation, China's steel industry itself needs to consolidate to face such challenges. The proposed BHP-Rio merger is yet another reminder that being a super-producer of steel doesn't necessarily give you strength, but the hints are falling on deaf ears in Beijing. The share of production held by China's top steelmakers is expected to decline again this year as smaller mills soak up every spare ton of iron ore. If China's steel industry was more disciplined, it would be able to plan better, buy less and bargain tougher.
Consolidation will be a long-term process, and the current boom in iron ore prices may well be over before all the merger and acquisition activity ends. For now, the Chinese may simply have to grit their teeth, wait for the outcome of BHP's audacious bid and concentrate on saving face at the negotiating table.