The Nippon Iron and Steel Federation — one of the most powerful industrial lobbies in Japan — has condemned the planned merger of BHP Billiton and Rio Tinto as an “obstacle” to a healthy metals market.

The comment came on the same day that the International Iron and Steel Institute (IISI), which represents some of the world’s largest steel companies, also hit out at the proposed takeover claiming it would create a “virtual” monopoly in iron ore and should be blocked.

Both attacks are a significant blow to BHP, which is on a global charm offensive focused on the company’s largest customers. They are also timed to coincide with the arrival in Tokyo yesterday of Marius Kloppers, the group’s chief executive, who is trying to persuade his huge Asian customer base that the proposed deal will not harm their businesses.

Hajime Bada, chairman of the federation and president of JFE, the world’s third-biggest steelmaker, said that the merger would create a titan controlling 60 per cent of Japanese iron ore exports. “We are worried that such a merger would impede a healthy market price mechanism,” he added.

His comments, supported by Akio Mimura, the president of Nippon Steel, provided a clear insight into Japan’s views on the BHP deal, analysts said. Other steelmakers confirmed that they were unhappy with the planned deal and believed that effectively it would end any meaningful negotiation at future price-setting talks.

One senior steel industry insider said: “Japan is quite reasonably worried that if its number of suppliers drops from three to two, its days of profitability will be under heavy threat.”

Ian Christmas, secretary-general of IISI, said: “It is vital that the competition authorities in the EU, USA, China, Australia and Japan also recognise the threat that this merger poses to the interests of steel consumers and the general public.”

Coming weeks before the annual iron ore price negotiations in Asia, the $170 billion (£83.1 billion) merger proposal has sparked alarm among steelmakers, but few expected the dismay to be aired in public so soon.

After a frosty reception in Tokyo, Mr Kloppers’s tour of the region is unlikely to become more cordial.

Privately Japanese, South Korean and Chinese steelmakers are dreading the Rio-BHP mega-merger.

Producers in China, who so far have remained publicly placid about the deal, may be particularly vulnerable.

Although their volumes of output are spectacularly large, the Chinese giants operate on far thinner margins than their Japanese and Korean counterparts.

Mr Kloppers was in Tokyo as part of a tour of three Asian cities. In Tokyo, he met Nippon Steel, JFE, Kobe Steel and several other large steel producers.

He also had talks with Mitsubishi Corporation, Japan’s largest trading company, and Itochu, its smaller rival. Discussions, according to knowledgeable sources, were "respectful, but frank”.

Mr Kloppers said that talks with Japanese customers had focused on BHP’s “more volume, more quickly” slogan, touting the supposed benefits of merging with Rio.

“The issues that concern customers are a subset of the general concerns of stakeholders . . . and that relates to ‘what is in this for me?’,” he said.

Meanwhile, speculation surrounds Mr Kloppers’s tour that BHP Billiton may be looking for Chinese partners with whom it might increase the original offer.

Mr Kloppers dismissed the speculation, saying: “There is only one proposition on the table.”

— BHP Billiton has hired Andrew Mackenzie, the former Rio Tinto executive, to head non-ferrous metals, the post that Marius Kloppers recently left to become chief executive.

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