The planned joint venture between the two largest miners in the world reached another setback as BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) received another disappointment with the German Federal Cartel Office (FCO).

The German Federal Cartel Office (FCO) will announce formally that it is not in favour of the two companies proposed iron ore production joint venture in Western Australia.

"The German regulatory process continues and the parties are expecting to receive a formal notification next week," BHP said in a statement.

Rio Tinto said: "The parties continue to believe that the joint venture is pro-competitive and will increase the supply of iron ore. However, both BHP Billiton and Rio Tinto acknowledge the concerns expressed by some regulators and the obstacles to achieving clearance for the joint venture."

No decisions about next steps have been taken at this stage while regulatory discussions continue.

"The Board acknowledged recent communications from regulators that indicate potential obstacles to achieving clearance for the joint venture. This includes the recent receipt of interim reports from the Japan Fair Trade Commission and the Korea Fair Trade Commission, and ongoing discussions with the European Commission and the Australian Competition and Consumer Commission," it added.

Meantime, a mining industry analysis raised by Merrill Lynch in a report by Bloomberg said the deal would possibly be aborted because of the legal impediments.

Merrill Lynch analysts led by Peter O'Connor said in a report published on 6 October and published online by Bloomberg: "Given the obstacles to the joint venture clearance it would appear that the likelihood of joint venture discussions 'in good faith' continuing past the drop dead date of Dec. 31 is increasingly remote."

Two of the world's biggest mining companies listed in the Australian Stock Exchange wants to file more pertinent submissions to the Australian Competition & Consumer Commission for their proposed iron ore collaboration.

In a related report of the Wall Street Journal, it said the delay being sought by the two mining giants would be for the new mining tax structure pending for implementation.

The two companies wanted to form a production joint venture to save no less than $10 billion in similar costs associated in mineral processing and transporting of the ore.

BHP and Rio Tinto executives said that the alliance will enable them to make the most of their two prime enablers to run smooth operations: blend iron ore from any of their mines, the flexibility to use all rail and port infrastructure.

Analysts said the main concern of mineral producers now is to minimise their operational costs to cope with any pending taxes imposed by the Australian government.

China's increasing iron ore demand

China, the biggest importer of iron ore, is seen to magnify its requirements as the state decided to stop its electricity cutbacks implemented this year to meet environmental targets.

With China's steel-making plants going on full-gear by year-end, more iron ore imports from Australia and other producers will be required.