News Room - Steel Industry

Posted on 09 Dec 2009

Steel bodies warn of Rio-BHP joint venture

Europe's steel industry reiterated on Tuesday its opposition to a planned iron ore joint venture between mining giants BHP Billiton and Rio Tinto and urged EU regulators to prohibit the deal.

 

World No. 2 iron ore producer Rio and No. 3 BHP announced a $116 billion agreement on Saturday to combine their Western Australian iron ore operations.

 

BHP dropped its hostile takeover bid for Rio a year ago after objections from the European Commission. The companies have sought to ease regulatory concerns this time by keeping their marketing separate.

 

Eurofer, the main lobby group for European steel makers, said the joint venture would pose a pricing threat.

 

"The joint venture ... will unavoidably lead to market concentration and an increase in pricing power of the combined company which is unacceptable in competition terms," Eurofer Director General Gordon Moffat said in a statement.

 

Rio and Tinto said the European Commission will review the joint venture under EU antitrust rules which prohibit companies from fixing prices and sharing markets.

 

Separately, the World Steel Association, which represents some 180 steel producers worldwide, urged antitrust regulators to review the joint venture thoroughly as it would reduce the number of players.

 

"The recently signed binding agreement between Rio Tinto and BHP Billiton is not materially different from the proposal issued earlier this year," Ian Christmas, director general at the World Steel Association, said in a statement.

 

"It still carries a great danger of restricting competition thus reducing consumers' choice... The proposed joint venture would simply turn an oligopoly of three players into a duopoly," he said.

 

BHP and Rio have filed with the competition authority in Australia and plan to file in other jurisdictions shortly. They expect to close the transaction in the second half of 2010.