UPDATE:Steelmakers Say Rio-BHP Iron Ore JV Should Be Blocked
June 05 2009 - 10:44AM
Dow Jones News
Steelmakers Friday called on relevant competition authorities to
"seriously examine" BHP Billiton Ltd. (BHP) and Rio Tinto PLC's
(RTP) proposed iron ore joint venture, saying it should be blocked
even in its revised form.
"We are again calling on competition authorities to seriously
examine the obvious implications for future pricing regimes and the
competitive environment for iron ore," Ian Christmas, director
general of the World Steel Association said on behalf of steel
producers worldwide. The association's members represent around 85%
of the world's annual steel production.
"At present we cannot see how this JV could be in the public
interest and thus it should not be allowed to proceed," he
said.
BHP and Rio Tinto Friday announced plans to create a 50-50 joint
venture that would generate $10 billion in synergies by operating
the pair's adajacent mines in the Pilbara region of Western
Australia as a single operation, streamlining rail haulage, and
optimizing future growth.
The joint venture is structured differently from last year's
proposed merger of Rio Tinto and BHP's entire businesses. Whereas
the merger would have led to the creation of a single iron ore
business, under the terms of the joint venture agreement, Rio and
BHP will keep their marketing divisions independent and separate
from each other and the joint venture, thereby limiting the
possiblity for price collusion.
Steelmakers, who rely on iron ore to make steel, are concerned
that the joint venture would conentrate too much iron ore
production within the hands of a single entity. Rio Tinto and BHP
together accounted for 33% of the world's 2007 sea-borne iron ore
trade, according to the latest figures from the association. The
top three producers, including Brazil's Vale SA (VALE), account for
69.2% of the world's seaborne iron ore trade.
BHP Chief Executive Marius Kloppers said he expected the 50/50
joint venture to be notifiable to the European Union but added that
the deal should present less anti-trust issues than last year's
proposed merge.
"Firstly, the scope is very different. It excludes mines such as
Samarco or (the Rio project) Simandou. It is also truncated in
completeness of business scope," Kloppers said during an analyst
call.
Under the terms of the agreement, Rio and BHP will set up a
separate marketing body that will share no pricing knowledge with
its owners.
Company Web site: http://www.worldsteel.org
-By Alex MacDonald, Dow Jones Newswires; +44 (0)20 7842 9328;
alex.macdonald@dowjones.com (Elisabeth Behrmann in Sydney
contributed to this story.)