Steel industry welcomes German decision to prohibit joint venture between BHP Billiton and Rio Tinto

Mr Gordon Moffat director general of EUROFER after announcement by the German Federal Cartel Office that it intends to prohibit the proposed iron ore joint venture between BHP Billiton and Rio Tinto in Western Australia said that “EUROFER has stated from the beginning that this joint venture could not be made to work in competition terms. We are confident that the European Commission will follow soon with a similar decision.”

EUROFER objected at both EU and German level against the JV as an unacceptable market concentration which would have restricted competition in the seaborne iron ore market to an even greater extent as already experienced today. The effect of the JV on the global iron ore market would not have been materially different from the full merger which had been proposed in 2008. A restriction in competition moving from a position of market dominance of three companies to only two would substantially have reduced the consumer choice of supplier. It effectively would have created a duopoly with the global iron ore market in the hands of just two companies.

BHP Billiton and Rio Tinto have market shares of 17 % and 19 % respectively in the seaborne iron ore market, while Vale, the third mining giant, controls 33 % (2008). These three companies together control 70 % of the seaborne iron ore market.

Also other countries object against the proposed JV. The competition authorities of South Korea already issued a statement of objections and the Japanese Fair Trade Commission has officially announced to issue one shortly.