SYDNEY, Oct 3 Australia's competition watchdog said on Wednesday it would not stand in th

SYDNEY, Oct 3 (Reuters) Australia's competition watchdog said on Wednesday it would not stand in the way of Rio Tinto Ltd's proposal to buy Canada's Alcan Ltd , which would make it the world's biggest aluminium producer.

The Australian Competition and Consumer Commission (ACCC) said there would not be a lessening of competition in the sector caused by the planned acquisition.

Rio is offering $101 a share, valuing Alcan at $38.1 billion.

With a combined aluminium smelting capacity approaching 4.4 million tonnes -- out of a projected 37 million tonnes to be consumed worldwide this year, Rio would easily eclipse other sector giants Rusal, China Aluminium and Alcoa in size.

The deal would also elevate Rio to the world's No.1 bauxite miner and put it on the way to becoming the top alumina supplier, without which aluminium cannot be made.

The deal has already received regulatory approval in Canada, the United States and Europe.

($1=A$1.13) REUTERS KR ht1312