[ferro-alloys.com] Merger and acquisition activity in the global iron ore mining industry dropped sharply in 2012 after picking up notably the previous year, according to a report by the United Nations Conference on Trade and Development.

The value of announced deals fell by 69%, while the number of deals dropped 32%, signifying lower average deal values in 2012, according to UNCTAD's new study, Iron Ore Market 2012-2014.

Two types of buyers dominated the M&A scene last year: Chinese buyers trying to secure foreign supplies of iron ore through direct investments, and steel companies integrating backwards "to reduce some of the pain inflicted byhigh iron ore prices," the report said.

In 2012, Chinese buyers and steel companies accounted for 70% of the total value of deals announced.

 

However, the report said the Chinese have experienced difficulty in closing deals. To date, 75% of the Chinese deals announced in 2012 in terms of value have failed.

"It is highly unlikely that the target the Chinese have set themselves -- around 50% control over imports of iron ore in 2015 -- will be met," the report added.

Japan, South Korea and India led moves by steel companies to secure their own iron ore mines, and many of their successful deals targeted Australia.

In addition, ArcelorMittal -- a strong believer in owning captive mines -- extended its holdings with the acquisition of the Baffinland venture in Canada.

However, the steelmaker later sold down some of its iron ore interests, a move seen by the report as a response to its high debt.