EUROFER Director General Warns Against Mining Joint Venture

Group voices displeasure over proposed venture between Rio Tinto and BHP Billiton.

EUROFER, the Brussels-based trade group representing the European steel industry, has asked  the European Commission to block a joint venture between BHP Billiton and Rio Tinto.

“In a global market already dominated by an oligopoly with just three suppliers—Vale, Rio Tinto and BHP Billiton—and in which the price of the iron ore has already reached a historical high in 2008, a joint venture of Australian iron ore assets is fundamentally against the interests of the steel industry, European consumers and the European economy”, EUROFER Director General Gordon Moffat says in response to the ongoing attempts by BHP Billiton to accomplish a joint venture (JV) with Rio Tinto.
 
“If allowed to proceed, the JV will restrict competition in relation to the fundamental competitive parameters in the seaborne iron ore markets: price, volume and quality,” Moffat says. “Therefore, EUROFER has requested the European Commission to exercise jurisdiction over this new transaction and carefully investigate its impact on free competition.”
 
Through the JV, BHP Billiton and Rio Tinto will develop a joint view about the perceived demand and supply balance and will not constrain each other during benchmark negotiations where prices and volumes are fixed. They will have identical output available and full knowledge of one other's volumes, EUROFER asserts. “Incentives for further iron ore capacity and infrastructure investment will be seriously constrained by the creation of the JV,” the group states in a press release.
 
The European Commission objected to a full merger proposal between the two entities in 2008. “There is no reason for the Commission to take a more positive view of this current JV proposal,” according to EUROFER. 
 
Represented by EUROFER, the European steel industry is the world leader in its sector with a turnover of €190 billion and direct employment of 420,000 people, producing 200 million metric tons of steel per year.

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