FT reported that the European Commission recently issued its statement of objections to BHP Billiton's proposed USD 79.5 billion hostile takeover of mining rival Rio Tinto, with the main competition barriers thought to be in the iron ore market.

As per report, neither BHP nor the European Commission made any official comment on the content of the statement. Details are expected to emerge in the coming week, after an edited version is circulated to interested parties, such as the steelmakers who are BHP and Rio's customers.

The main objections to the proposed deal are likely to be in the iron ore market. When the Commission opened its in-depth inquiry into BHP's proposed takeover, it said a merged company would hold "a significant share" of iron ore supplies and that its share, plus that of its next competitor, would amount to a "very large part of iron ore supplies".

Steelmakers opposed to the move have argued a merger would mean up to 80% of the world seaborne trade in iron ore could be in just two companies' hands the other being Vale of Brazil with significant potential implications for pricing power.

The Commission has also expressed concerns that the proposed deal would reinforce BHP's leading position in metallurgical coal. When the Commission opened the inquiry, Mr Neelie Kroes the European Union competition commissioner, warned that a recent surge in commodity prices had significantly affected industries buying commodities produced by the two companies, and said it would be particularly alert to any developments that made the situation worse.

Since then commodity prices have dropped sharply because of recession fears. Nevertheless, the Commission still appears concerned about supply issues.