Dec. 7 (Bloomberg) -- Sinosteel Corp., China's second- biggest iron-ore trader, offered A$1.2 billion ($1.1 billion) to buy Midwest Corp. to secure supplies, amid concerns two of the world's largest producers of the raw material will combine.

Sinosteel bid A$5.60 a share, Perth-based Midwest said today in an e-mailed statement, 16 percent more than the stock's last traded price and 54 percent more than an offer from Australian rival Murchison Metals Ltd. A takeover could be the largest overseas metals acquisition by a Chinese company.

``They want to get their hands on iron ore direct,'' Gavin Wendt, a senior resource analyst at Fat Prophets Funds Management, said in Sydney. ``It isn't surprising given the extraordinary level of Chinese interest in Australian iron ore.''

BHP Billiton Ltd.'s bid for Rio Tinto Group to create a company controlling almost half the Asian iron-ore market has sparked concerns among Chinese companies who said they will speed up acquisitions. China has been scouring the globe for raw materials to maintain a decade-long economic boom.

Midwest has risen fivefold this year, and last traded at A$4.85 today on the Australian Stock Exchange before the stock was suspended. It rejected an offer from Murchison, which has bid one new share for every 1.08 Midwest stock.

Prices for iron ore, a key steelmaking raw material, have risen for five straight years on increased demand from China, the world's largest steelmaker. Iron ore prices may rise as much as 50 percent next year, Macquarie Group Ltd. and Goldman Sachs JBWere Pty have said.

The Sinosteel proposal ``is incomplete, non-binding, subject to due diligence and a number of other conditions,'' Midwest said in the statement today.

John McGlue, a spokesman for Murchison Metals, couldn't immediately comment when reached by phone in Perth.

To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.netRebecca Keenan in Melbourne at rkeenan5@bloomberg.net

Last Updated: December 7, 2007 03:01 EST