Saturday, June 6, 2009

BHP BIlliton-Rio Tinto merger

Steel industry renews call for review

Brussels, 5 June 2009 – The World Steel Association (worldsteel) has repeated its concerns issued in February 2008 following today’s announcement of a possible Rio Tinto/BHP Billiton joint venture (JV) of their Western Australia iron ore interests. This is matched with a formal request that all relevant competition authorities should very carefully review this proposed alliance. 
Speaking on behalf of steel producers worldwide, worldsteel Director General Ian Christmas said: “The announcement of this possible JV does nothing to allay the far greater competition issues that we were and are still concerned about. 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.”
 
Concluding, Ian Christmas said: “As we said in our statements last year, worldsteel supports free and fair trade in steel. Competition between steel companies promotes innovation and efficiency. It promotes the growth in steel use and serves steel’s customers and society as a whole. worldsteel has also supported the consolidation of steel businesses 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.”
 

 
Note
 
· The World Steel Association (worldsteel) is one of the largest and most dynamic industry associations in the world. worldsteel represents approximately 180 steel producers (including 18 of the world's 20 largest steel companies), national and regional steel industry associations, and steel research institutes. worldsteel members produce around 85% of the world's steel.
· Vale owns virtually the whole of the Brazilian iron ore export industry. 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. 
· A 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.

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