Steel Lobby to Call for EU to Block Rio/BHP Merger

Eurofer, the lobby group for the European steel industry, said on Tuesday it will ask the European Commission to block BHP Billiton's plans to buy rival Rio Tinto due to competition concerns.


"We will be urging the Commission to take a negative view on it," Gordon Moffat, Eurofer Director General, told Reuters, adding that contacts with the EU executive body would be made this week.

A combined group would hold about 27 percent of the world market for iron ore.

Moffat said that such a concentration fuelled worries among European steel makers that a merged BHP Billiton and Rio Tinto would have too much leverage on pricing, which could damage the competitiveness of the industry and hurt consumers.

The International Iron and Steel Institute (IISI) took a similar view.

It said in a statement on Monday that CVRD, Rio Tinto and BHP Billiton jointly accounted for more than 70 percent of seaborne iron ore total world trade.

Rio Tinto
Rio Tinto

"Any further consolidation between the big three would create a virtual monopoly in the business," IISI Secretary General Ian Christmas said.

"This merger is not in the public interest and should not be allowed to proceed," he added.

A number of steelmakers such as ArcelorMittal , the world's largest steel producer, announced plans to increase their own iron ore production to protect themselves against price increases that could result from the concentration of the sector.

By contrast, other miners have supported the controversial deal. Roger Agnelli, chief executive of CVRD said the merger of BHP with Rio Tinto would be positive for the mining industry.

CVRD bought Canada's nickel producer Inco for nearly $18 billion last year, which it says made it the world's second-biggest integrated mining company.

Last week, Rio Tinto rejected BHP Billiton's takeover proposal, which was worth $140 billion at the time, but on Monday BHP mapped out its plan, promising to hand $30 billion to shareholders via a share buyback if the deal goes through and signaling it was ready for a long fight.