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World Steel Association Renews Call for Review of Proposed Rio Tinto-BHP JV
06/09/2009 - The World Steel Association repeats its concerns, calling all competition authorities to thoroughly review the proposed Rio Tinto-BHP Billiton joint venture of their Western Australia iron ore interests.
The World Steel Association is repeating the concerns it originally issued in February 2008 following the announcement of a possible Rio Tinto-BHP Billiton joint venture of their Western Australia iron ore interests. The Association also issued a formal request that all relevant competition authorities should very carefully review this proposed alliance.
"The announcement of this possible JV does nothing to allay the far greater competition issues that we were and are still concerned about,” stated worldsteel Director General Ian Christmas, speaking on behalf of steel producers worldwide. “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."
A JV of BHP Billiton and Rio Tinto’s Western Australia iron ore interests would lead to control of Australian iron ore exports, similar to Vale’s ownership of most of the Brazilian iron ore export industry. Most Australian exports go to Japan, China and other Asian countries, where Australia is the main source of ore.
Worldsteel noted that BHP Billiton has been trying for some time to equalize landed prices for its ore exports to Asia with the landed cost of Brazilian ore, which includes a significantly higher freight component. Allowing the Western Australia JV to control all Australian iron ore exports would place it in a monopoly position to force this type of equalization, which would ultimately increase iron ore costs to the detriment of steel consumers worldwide.
If BHP Billiton and Rio Tinto are allowed to merge their Western Australia iron ore interests into a JV, almost 70% of world seaborne iron ore exports would be controlled by the new JV and Vale.
“As we said in our statements last year, worldsteel supports free and fair trade in steel,” continued Christmas. “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,” added Christmas. “We stand ready to provide access to our data to help competition authorities review the impact of this new JV proposal."
The World Steel Association (worldsteel) is one of the largest and most dynamic industry associations in the world, representing 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.
