August 29, 2008

BHPB bid for Rio - German steelmakers oppose the move

It is reported that German steelmakers urged Brussels on Tuesday to block miner BHP Billiton's planned takeover of rival Rio Tinto that would create a USD 350 billion plus industry giant.

Mr Dieter Ameling president of German Steel Federation said that "This merger between the iron ore market's world number two and three would further raise the pressure on iron ore prices. It would limit the steel industry's access to the raw material. That kind of market dominance doesn't allow practically any leeway during price negotiations.”

He added that "Such a merger is in breach of the public interest since it intensifies the burden on the value creation chain in industrial production and should therefore not be permitted.”

According to the association, were the deal to go through, it would create a duopoly, with a combined BHPB Rio entity controlling 36.8% of the global iron ore market and Brazil's CVRD having 31.5%. The association added that even before negotiations with ore producers for next year's prices begin, double digit percentage rate increases are already in discussion.

German Steel Federation association represents German companies such as ThyssenKrupp and Salzgitter, the two biggest steelmakers in the country, as well as the German operations of global steel industry leader ArcelorMittal.