Global steel sector wants review of BHP-Rio JV

I-Net Bridge | Fri, 05 Jun 2009 15:28

[miningmx.com] -- The World Steel Association, which represents steel producers globally, on Friday called for competition authorities to examine the planned iron ore joint venture between BHP Billiton and Rio Tinto in Western Australia "very carefully".

The association raised concerns over BHP Billiton proposed its take over of Rio Tinto earlier this year and has reiterated the importance of careful review.

"The announcement of this possible JV does nothing to allay the far greater competition issues that we were and are still concerned about," said World Steel Association director general Ian Christmas.

Brazilian miner Vale owns virtually the whole of the Brazilian iron ore export industry and the association believes that a JV of BHP Billiton and Rio Tinto's Western Australia iron ore interests would similarly control Australian iron ore exports.

Almost all Australian exports go to Japan, China and other Asian countries. Australia is the main source of ore for these countries.

"BHP Billiton has for years been trying to equalise landed prices for its ore exports to Asia with the landed cost of Brazilian ore, which includes a far higher freight component. If this Western Australia JV controlled all Australian iron ore exports it would be in a monopoly position to force this through, increasing iron ore costs to the detriment of steel consumers worldwide," the association said in a statement.

An additional consequence of allowing BHP Billiton and Rio Tinto to merge their Western Australia iron ore interests into a JV, would result in almost 70% of world seaborne iron ore exports being controlled by the new JV and Vale.

] "We are again calling on competition authorities to seriously examine the obvious implications for future pricing regimes and the competitive environment for iron ore. At present we cannot see how this JV could be in the public interest and thus it should not be allowed to proceed," said Christmas.

The World Steel Association supports free and fair trade in steel.

It believes that competition between steel companies promotes innovation and efficiency while promoting the growth in steel use.

The association said it also supports the consolidation of steel business but not to the extent of endangering competition.

Even the largest steel company in the world today accounts for less than 15% of total world steel production.

"We stand ready to provide access to our data to help competition authorities review the impact of this new JV proposal," Christmas said.