June 8, 2009 / 1:53 AM / 10 years ago

China says BHP-Rio iron ore JV monopolistic: report

SHANGHAI (Reuters) - China’s leading steel industry group strongly opposes a joint venture deal consolidating iron ore assets of BHP Billiton (BHP.AX)BLT.L and Rio Tinto (RIO.AX)(RIO.L) in Australia, China’s influential Caijing Magazine reported.

Combination file photograph of BHP Billiton CEO Marius Kloppers (L) speaking in London June 23, 2008 and Rio Tinto CEO Tom Albanese at a news conference in Montreal July 12, 2007. REUTERS/Andrew Winning/Christinne Muschi/Files

It also said China Iron and Steel Association (CISA) General Secretary Shan Shanghua denied media reports that Chinese steel makers would accept a drop of only 33 percent in iron ore term prices as agreed to with miners by Asian steelmakers Nippon Steel (5401.T), JFE Holdings Inc (5411.T) and POSCO (005490.KS).

CISA, the de facto negotiator leading Chinese steel mills in iron ore price talks this year, has insisted on price cuts of at least 40 percent.

“After BHP Billiton and Rio Tinto establish the joint venture, large iron mines in Australia will belong to one company and this will lead to a monopoly operation,” Shan was quoted as saying in the Caijing report, published late on Friday.

“China needs to import almost half of the iron ore it consumes, while the volumes from BHP Billiton and Rio Tinto account for more than half of imports.”

The World Steel Association has also said it opposed the BHP-Rio Tinto deal, which would leave just two suppliers — the Australians’ joint venture and Brazil’s Vale VALE5.SA — controlling 70 percent of global iron ore trade.

The global association also called on competition authorities to seriously examine the deal, announced as Rio Tinto scrapped its proposed $19.5 billion tie-up with the Aluminum Corp of China (Chinalco).


Shan was quoted as saying that China’s demands in the 2009/10 iron ore negotiations were very clear, calling for an accurate reflection of changes in supply and demand conditions this year in the international iron ore market, where the global economic slump has softened demand.

“We absolutely will not accept a 33 percent price cut,” he said.

“Iron ore term prices would be higher than last year under the 33 percent price cut agreed to by Nippon Steel and the Australians, as the Australian dollar depreciated 35 percent,” he said.

Industry website Steel Business Briefing reported on Friday, citing unnamed sources, that CISA and Baosteel (600019.SS), China’s largest steelmaker, had agreed internally to accept terms similar to those already struck with other Asian mills.

Shan added that Chinese steelmakers in CISA had no right to negotiate iron ore prices individually with overseas miners and that any separate agreements reached with miners would be invalid, as Baosteel was the only steel mill authorized by CISA to participate in talks on behalf of Chinese firms.

He also denied a media report that a state-owned steel major was in talks with BHP Billiton on an indexed pricing system.

Sources familiar with the situation said last week that BHP was offering index-linked iron ore pricing to Chinese steel mills.

Reporting by Alfred Cang and Edmund Klamann; Editing by Jacqueline Wong

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