Chinese steel group opposes Rio-BHP venture
BEIJING — China’s steel industry group said Tuesday it opposes a proposed venture between leading iron ore producers BHP Billiton and Rio Tinto as a monopolistic move.
“This kind of joint venture agreement has a strong monopolistic color, and the China Iron and Steel Association opposes the establishment of such an agreement,” the group said in a statement. Its 119 members account for 90 percent of output in China, the world’s biggest steel producer.
China imports nearly all of its iron ore. Producers are sensitive to any move that might give suppliers more power in setting prices after Chinese mills were forced in recent years to accept sharp increases in ore costs.
Rio Tinto Group PLC and BHP Billiton Ltd. said Friday they would combine their iron ore assets in Western Australia state. The same day, Rio Tinto called off a planned $19.5 billion investment in the company by Aluminum Corp. of China, or Chinalco.
The Chinese steel group said it would ask relevant government departments to investigate the arrangement.
Earlier Tuesday, a group of European steel producers expressed similar opposition to the Rio Tinto and BHP tie-up, calling for an antitrust investigation. European opposition forced BHP to drop a $68 billion attempt last year to take over Rio Tinto.
BHP and Rio Tinto are the world’s No. 2 and No. 3 iron ore producers and a combination of the two companies would replace Brazil’s Companhia Vale do Rio Doce SA as the world’s top supplier.
The Chinese steel group earlier expressed concern that any combination of iron ore suppliers would lead to higher prices. China’s mills have banded together to negotiate annual supply contracts in hopes of securing better prices.
A foreign ministry spokesman Tuesday expressed dismay at Rio Tinto’s cancellation of the Chinalco deal.
“The unilateral move taken by Rio Tinto not only disappointed the Chinese enterprise but also aroused great repercussions in the people of the Chinese industry,” spokesman Qin Gang said. “We hope that prices of international mining resources could keep stable and that the international market should be fully open.”
The official Xinhua News Agency questioned whether Australia’s government was involved in quashing the deal. Prime Minister Kevin Rudd said Friday that Rio Tinto’s move was purely commercial and Chinese investment was welcome in Australia.
“Rio Tinto’s ability to say ‘bye bye’ to Chinalco and ‘hello’ to BHP overnight cast doubt on whether government indications were behind the curtain,” Xinhua said.
“Rudd’s statement on Friday that Rio’s dumping of Chinalco was ‘entirely a commercial matter’ or Swan’s assurance that ‘Chinese investment is welcome in this country’ sounds less sincere, given the facts,” it said. “The Rudd government has been playing the ‘national interest’ card from day one and displayed the skill well.”
Last week, the steel association said it rejected iron ore prices negotiated by Rio Tinto with Japanese and South Korean mills as unreasonably high. That broke with an industry tradition of treating the first agreement in annual supply talks as the benchmark for other customers.
Rio Tinto agreed to a 30 percent price cut with its Japanese and Korean customers, but the Chinese group said even that level for the buying year that begins June 30 would result in losses for China’s mills.
Associated Press Writer Gillian Wong in Beijing contributed to this report.
On the Net:
China Iron & Steel Association (in Chinese): www.chinaisa.org.cn
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