China says Rio-BHP iron ore joint venture may be a monopoly
Rio Tinto-BHP Billiton plan has world steelmakers up in arms
Tom Stundza -- Purchasing, 6/18/2009 10:10:15 AM
Rio Tinto and BHP Billiton's proposed iron-ore joint venture probably won't happen until a year from now but the marriage proposal, already under attack by the World Steel Association and Eurofer, the European Union's steel lobbying group, now is being assailed by China as "monopolistic."
As reported earlier, Rio Tinto scrapped a proposed $19.5-billion tie-up with Chinese metals group Chinalco two weeks ago and instead coordinated plans for an iron ore production joint venture in Western Australia with rival Australian miner BHP Billiton.
Reuters News reports that BHP Billiton executives have said the joint venture is unlikely to trigger a change in the controversial annual benchmark pricing. But China's state media is quoting Chen Yanhai, the head of the raw material department at the Ministry of Industry and Information Technology, as saying "the potential deal has an obvious color of monopoly." He adds that the joint venture "is likely to have a big impact on the Chinese steel industry as China is the world's biggest iron ore importer" (so) the deal should be subject to Chinese anti-monopoly law."
The joint venture brouhaha is a backdrop to this year's contentious iron ore contact talks. China, the world's largest steel producer, has been holding out for a minimum 40-45% price cut from Australian and Brazilian suppliers after Japanese and Korean firms accepted 33%. The Chinese steelmakers toughened their position last week by threatening to walk away from fiscal 2009-2010 contract talks and to reduce steel output.
A Reuters News report this morning quotes Australian Trade Minister Simon Crean responding to China's concerns by saying: "I think it's important to understand that the proposal that Rio and BHP have entered is to share facilities and to try and get efficiency and therefore costs down from those shared facilities. They will still operate as separate marketing arms. They will therefore be competitors and so there won't be any lessening of competition, and this is a message that I've conveyed to the Chinese ambassador, and I think that when the details of the proposal emerges, there will be acceptance of that."
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