China attacks Rio's iron deal with BHP as 'monopolistic'

British company criticised after scrapping £12bn tie-up with state-owned Chinalco

China threatened to derail Rio Tinto's joint venture with BHP Billiton yesterday, saying the move had "an obvious colour of monopoly". This comes just weeks after Rio walked away from a $19bn (£12bn) deal with state-owned group Chinalco at the 11th hour.

Chen Yanhai, from China's Ministry of Industry and Information Technology, said the agreement could harm the domestic steel industry in a country that is the world's biggest iron ore importer. "The deal should be subject to Chinese anti-monopoly law," he said.

Rio was quick to point out that the joint venture was designed to share production and not marketing, saying it would not affect the price of iron ore.

A spokeswoman for the group said: "We will be engaging and co-operating with regulators in China, Japan, South Korea and Taiwan, as with other regulators around the world. We will do whatever is legally required, including making any necessary filings."

Rio had signed a deal back in February, which would have seen Chinalco take an 18 per cent stake in the group. It unravelled after shareholders lobbied against the move and the regulators warned the deal could face close scrutiny. Rio walked away from the deal at the beginning of June.

The group's management, led by Tom Albanese, moved quickly to secure additional financing to pay down debt. It decided to raise $20bn through a rights issue and the joint venture with BHP.

At the time, a professor of Chinese studies at the University of Nottingham warned that Rio would face a backlash from the Chinese after the agreement with Chinalco collapsed. First signs of that backlash emerged yesterday. Chinalco's response at the time was restrained; the group said little more than it was "very disappointed".

Professor Shujie Yao said it would be a "painful blow for Chinese esteem: Rio Tinto has been courting two lovers at the same time – one openly, and one under the table".

Rio and BHP said the production joint venture would comprise both companies' iron ore assets in Western Australia. They said the synergies should save more than $10bn, however the venture has strengthened concerns that the group has damaged relations with China, its most important client.

Australia's Trade Minister, Simon Crean, waded into the row, saying there were no monopoly concerns over the venture: "They will still operate as separate marketing arms. They will therefore be competitors and so there won't be any lessening of competition."

He said the collapse of Chinalco's offer would be an "eye opener" for the Chinese and showed the power that shareholders wield: "It's going to be an important learning curve for China."

Rio's shares went ex-rights yesterday after its decision to tap investors for capital, which sent them spiralling 23 per cent lower. This comes at a bad time for Rio as it is in late-stage negotiations to agree the price of its iron ore exports. China is holding out for a 40 per cent price cut, citing the financial crisis.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Under the skin: Sarah Kane in May 1998
theatreThe story behind a new season of Sarah Kane plays
Arts and Entertainment
Preening: Johnny Depp in 'Mortdecai'
filmMortdecai becomes actor's fifth consecutive box office bomb
Sport
Bradford City's reward for their memorable win over Chelsea is a trip to face either Sunderland or Fulham (Getty)
football
News
Lars Andersen took up archery in his mid thirties
video
Voices
Focus E15 Mothers led a protest to highlight the lack of affordable housing in London
voicesLondon’s housing crisis amounts to an abuse of human rights, says Grace Dent
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project