Chinese steelmakers, the largest buyers of iron ore, and the government are studying a joint bid for Kennecott Utah Copper parent company Rio Tinto Group, countering a $134 billion offer from BHP Billiton Ltd.

"It's an issue being discussed by top-level officials," Chen Hanyu, a director at the resources office of Shougang Corp., the nation's ninth-largest steelmaker, said today in an interview.

Members of the China Iron and Steel Association have held talks, Qi Xiangdong, the group's vice chairman said.

The steel mills want to block BHP's stock offer for London- based Rio because the deal would give the world's biggest mining company control of almost half the Asian market for iron ore. A bid, which would need Australian government approval, would be China's biggest overseas takeover and secure supply of the raw material needed to support the fastest growth of any major economy.

"There are clear strategic reasons why they would consider" a bid, Angus Gluskie, who helps manage the equivalent of $500 million at White Funds Management, including Rio and BHP shares, said in Sydney. The newly elected Labor Party government may oppose such a transaction, he said.

Rio, the world's third-largest mining company, owns iron ore, copper and uranium mines in Australia.

"A few of the biggest steelmakers in China and the central government may team up for the bid," said Shougang's Chen.

Baosteel Group Corp., the nation's largest steelmaker, and domestic rivals are studying a bid, the 21st Century Business Herald said today, citing Baosteel Chairman Xu Lejiang. Fan Shunbiao, a spokesman for Baosteel, said he's not aware of any talks regarding a bid. Amanda Buckley, a Melbourne-based spokeswoman for Rio, couldn't be reached on her office phone.

Chen Bin, director of the industrial department of the National Development and Reform Commission, which supervises China's steel industry, said the commission is not involved in any Rio Tinto bid proposal.

A five-year increase in metal prices has spurred about $185 billion of bids in the industry in the past year, according to data compiled by Bloomberg. China this September created a sovereign wealth fund, China Investment Corp., with $200 billion to seek investments to improve returns on its $1.46 trillion of reserves.

"It's almost an open secret that China wants to secure more overseas resources assets," said William Fong, who helps manage $6.8 billion of Asian equities at Baring Asset Management Asia Ltd., in Hong Kong. "BHP's bid for Rio is probably a trigger."

Rio's chief executive officer Tom Albanese has told investors BHP's three-for-one stock proposal undervalues his company. A BHP takeover of Rio would trigger a new round of acquisitions and exert "very heavy pressure" on the management of Chinese mining companies, China Shenhua Energy Co., the world's second-largest coal company, said last month.

BHP and Rio would together control 38 percent of the global seaborne iron ore trade, according to the Australia & New Zealand Banking Group Ltd., rivaling the largest producer Cia. Vale do Rio Doce. The proposal has met with objections from steelmakers in China, Japan, South Korea and Europe.

"Chinese steelmakers are so fragmented, putting them in a weaker position when negotiating with giant iron ore suppliers," Helen Wang, a Shanghai-based analyst at DBS Vickers Hong Kong Ltd., said by phone today. "They have to face the reality that they have no choice other than teaming up with the government for a possible counter bid for Rio."