Thursday, October 24

China reviewing Rio, BHP iron ore joint venture

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BEIJING: China said yesterday it has started an anti-monopoly review on a proposed iron ore joint venture between mining giants BHP Billiton and Rio Tinto, amid growing tensions over pricing.The commerce ministry said its anti-monopoly department had received applications from the Anglo-Australian companies on plans to jointly produce iron ore at their West Australian Pilbara operations, an official told AFP.

“We have noted concerns of relevant parties and will carry out a study strictly according to the laws,” said the official, who declined to be named.

The study is to find out whether the proposed deal will be subject to an anti-monopoly investigation, the official said.

Regulators in Australia and Europe are also reviewing the tie-up between the miners, who account for more than one-third of total global supply of the commodity, on fears that their joint venture threatens to skew the market.

China’s anti-monopoly legislation requires firms to get Chinese government approval before their merger if their aggregate global revenue exceeds 10 billion yuan (US$1.5 billion) or if revenue in China exceeds two billion yuan.

Authorities will also review the deal if two or more of the firms each report more than 400 million yuan of revenue in China in the last fiscal year.

It was unclear how China might enforce its decision if it were to deem that the joint venture violated its anti-monopoly legislation.

The announcement comes a day after the commerce ministry said it had taken note of requests by foreign steelmakers for anti-monopoly probes of global miners over recent price hikes.

The World Steel Association, which represents about 180 steelmakers, has called for global competition regulators to examine the iron ore market after BHP, Rio and Brazil’s Vale abandoned annual contracts in favour of a short-term pricing system.

European steelmakers also have appealed to regulators to “tackle competition distortion and excessive pricing” after iron ore miners attempted to increase prices by “80 per cent or more.”

“The anti-monopoly bureau of the ministry is studying the situation,” commerce ministry spokesman Yao Jian said, without elaborating.

China is the world’s largest importer of iron ore and Chinese steel mills want to maintain the long-term contract price system to avoid large price fluctuations. — AFP