Steel industry fights Rio's tie-up with BHP

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The Independent Online

Eurofer, the European steel industry body, last night called on the European Union to block BHP Billiton and Rio Tinto's iron ore joint venture in Western Australia, arguing that the tie-up between the two mining giants will lead to "market concentration".

Gordon Moffat, the director-general of Eurofer, which represents iron ore producers, warned that: "The joint venture... will combine their production and infrastructure facilities and will unavoidably lead to market concentration and an increase in pricing power of the combined company which is unacceptable in competition terms."

The interjection comes a day after the two groups formally agreed the deal, which they say will deliver $10bn in savings. However, the agreement follows BHP's aborted plan last year to buy Rio Tinto, when it blamed hostile market conditions for walking away. It was also aware that the takeover would have faced several regulatory hurdles.

BHP refused to comment last night, but Rio issued a statement defending the agreement: "This is a production joint venture only. It will enable BHP Billiton and Rio Tinto to deliver more ore to the market faster and at lower cost by unlocking the synergies between their two businesses. There will continue to be complete independence in their marketing and commercial strategies, as is the case today."

Rio Tinto recently scotched rumours that it was preparing abandon the deal. The groups will combine mining operates, but will run separate marketing efforts as part of the agreement.

On confirming that the deal had been signed earlier this week, BHP's chief executive Marius Kloppers said: "We are very pleased to now have formal and binding agreements in place to develop this important joint venture. With the history of both companies' attempts to join together these two world-class iron ore operations in Western Australia at various times, this deal has effectively been more than a decade in the making."