UPDATE 4-Sinosteel in hostile bid for Australia's Midwest

(Recasts lead, updates shares to close)

By James Regan and Denny Thomas

SYDNEY, March 14 (Reuters) - Sinosteel Corp offered A$954 million ($902 million) for prospector Midwest Corp (MIS.AX: Quote, Profile, Research, Stock Buzz) to lock up future iron ore supplies, marking the first hostile bid by a Chinese firm in Australia's booming mining sector.

Sinosteel, a steel commodities trader, already owns 19.9 percent of Midwest and is a partner in its Mt Weld prospect, one of five deposits it is looking to exploit.

"Miners are realising that the cost of mining in China is high and that overseas it is relatively cheaper," said Liu Yikang, Deputy Secretary General of China Mining Association.

The offer valued Midwest at $1.1 billion or A$5.60 a share, a 35 percent premium to Midwest's Thursday close. The stock jumped 31 percent to A$5.43 on Friday, still short of the offer price, suggesting there may not be competing suitors.

Sinosteel dropped a friendly buyout proposal for Midwest in January after Malaysia's David Law, a Midwest director who holds a 13.3 percent stake, said he would not accept A$5.60 a share.

"We have made this offer directly to Midwest shareholders as we firmly believe it provides (them) with the opportunity to realise certain value in cash for their shares at a significant premium to historical trading levels," Sinosteel President Tianwen Huang said in a statement.

Sinosteel's offer hinges on securing at least 50.1 percent of Midwest's shares. It said it already had clearance to proceed from Australia's Foreign Investment Review Board.