UPDATE: China Assoc:Cannot Yet Call Rio-BHP JV A New Monopoly
June 05 2009 - 12:34AM
Dow Jones News
A new alliance between Rio Tinto PLC (RTP) and BHP Billiton Ltd.
(BHP) can't yet be called a "new monopoly" in the iron ore market,
a senior Chinese steel industry official said Friday, but warned
anti-monopoly measures were available if monopolistic tendencies
began to show.
"At this point, it's merely a joint venture," said Zou Jian,
executive director of the Chinese Iron and Steel Association.
"We can't call it a new monopoly yet. But if it does become a
new monopoly, there will be anti-monopoly measures available to
deal with it."
Rio Tinto is entering into a 50-50 iron ore joint venture with
BHP that spells the end of its planned US$19.5 billion alliance
with Aluminum Corp. of China, or Chinalco.
The association, for now, doesn't believe the Rio-BHP alliance
would affect 2009 iron ore term price talks, still ongoing between
global miners and Chinese steel mills.
"I don't believe there will be much effect on China on the iron
ore price, because China's too big of a market," Zou said. "That in
itself is an advantage."
China's Ministry of Commerce said it was still coordinating with
its departments for an official response, and had no official
response Friday morning.
But steel analysts said they felt the Rio-BHP joint venture
would threaten to create a greater degree of monopoly in the iron
ore supply market.
The Rio-BHP alliance would clearly pose a bigger threat of a
monopoly than just an iron ore supply landscape that, for the
Chinese, until now comprises three major miners: BHP, Rio Tinto and
Brazil's Vale S.A. (VALE), said Ma Haitian, a senior steel analyst
at state-owned metals consultancy Antaike.
"The big three miners on their own were already pretty
monopolistic, and in past years it's worked to their advantage,"
said Yu Liangui, a senior analyst for top Chinese metals
consultancy Mysteel. "With the BHP-Rio joint venture, that will be
even more of the case. It'll be difficult to break this
monopoly."
Yu said the Rio-BHP development narrows China's already
dwindling options on this year's term price talks.
"China still had hopes that they could could negotiate with
three miners," he said. "Now it will be as if there were just two.
Things are getting more difficult for China."
-By Chuin-Wei Yap, Dow Jones Newswires; 8610 6588 5848;
chuin-wei.yap@dowjones.com