Mumbai: The Chinese authorities are likely to reject BHP Billiton's $177 billion takeover bid for Rio Tinto Group as it would create an iron ore monopoly along with Vale, the China Iron and Steel Association said.

China's ministry of commerce is reviewing anti-trust issues of the takeover bid, following concerns raised by the association, Luo Bingsheng, vice chairman of the group, said.

''BHP Billiton, Rio Tinto and Brazilian miner Vale already have a monopoly on the global market, and if two of them get merged, things will certainly get worse,'' CISA deputy chairman Luo Bingsheng wrote to the commerce ministry.

He said CISA has also made a submission to the European Commission, which also sought the opinion of Chinese steel makers on BHP's $177 billion hostile bid for Rio.

Chinese steel producers, already hurt by a doubling of iron ore prices, want to block the merger as the deal would create the world's biggest mining company having control of almost half the Asian market for iron ore.

For China, the world's largest steel producer and iron ore importer, there are also political and commercial risks as such a takeover may affect its long-term interests with its major trading partner, Australia.

Australian miners on the other hand, are fighting a serious threat of Chinese acquisition of their mineral assets. A sale of any serious scale to Chinese interests might also severely jeopardise Australian government's policies and programmes.

Chinese steel company Chinalco along with Alcoa had, in February, stunned BHP and the rest of the investment world with the acquisition of a 12 per cent stake in Rio for $14 billion.

China's Sinosteel, China Metallurgical and CITIC Pacific have taken big-ticket positions in Australia's junior iron ore sector over the past one year.

Russians firms Metallinvest and Evraz along with Ukraine's Gennadiy Bogolyubov has bought out manganese and iron ore asset Consolidated Minerals from the grasp of former BHP boss, Brian Gilbertson.

The world's largest steel group, ArcelorMittal, which is seeking backward integration, is also seriously concerned about a merger of BHP and Rio.

These investors are either traders to the steel industry or steel producers pursuing backward integration into the raw materials business.

BHP has confirmed the filing of an application with the Chinese competition authorities.

The Australian Competition and Consumer Commission is also due to accept comments from overseas consumers, including Chinese and other Asian steel mills. The commission is expected to announce its findings on 13 August.

BHP expects the combined outfit to realise $3.7 billion (A$3.9 billion) worth of synergies through the sharing of infrastructure and services at neighbouring assets.

BHP's offer of 3.4 of its shares for every Rio Tinto share held also represented a "substantial premium" of 45 per cent. But, for Rio shareholders, there may be serious risks down the sale path as only one single asset that the company owns wholly - Hamersley Iron in Australia.

Rio had thrice rejected BHP's takeover offer saying the price has just been too low. Analysts now expect Rio Tinto to go for a partial sale of its Hamersley Iron operations to revaluate its global asset pool.

BHP said in early July that the US had already ended its bid review, but it has still to clear the UK and the EU hurdles.