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
Britain's opposition Labour Party leader Ed Miliband (R) and Boris Johnson, mayor of London, talk on the Andrew Marr show in London April 26
General electionAndrew Marr forced to intervene as Boris and Miliband clash on TV
peoplePair enliven the Emirates bore-draw
Arts and Entertainment
tvPoldark episode 8, review
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions