European steelmakers called Friday for EU regulators to block BHP Billiton Ltd.'s efforts to take over mining rival Rio Tinto PLC, saying that such a deal would allow a new iron giant to fix prices for steel's key raw material.
Eurofer, the European Confederation of Iron and Steel Industries, said it "cannot believe that the (European) Commission will authorize the merger of two of three mining companies which dominate almost 75 percent of the world market for seaborne iron ore."
The group's director general, Gordon Moffat, said the takeover would give the new company the power to fix prices for iron ore and coking coal -- beyond price surges in recent years amid growing demand from China.
"This is not in the interest of the European steel industry, which has already had to pass on huge increases in raw material costs," he said in a statement.
The steel industry has seen costs soar in recent months. Companhia Vale do Rio Doce, the world's largest iron ore miner, struck a deal with six Asian steel makers in February to raise iron ore prices by 65 percent. The coking coal that heats furnaces has gone up 200 percent.
ArcelorMittal SA, the world's largest steelmaker and a Eurofer member, has blamed these huge price hikes for its own price increases, which force customers pay more for the steel used in buildings, cars and machinery.
A BHP Billiton takeover of Rio Tinto would combine the No. 2 and No. 3 iron miners and allow them to overtake Vale with a market share of almost 40 percent of seaborne iron ore. But it is far from being completed. Rio Tinto has so far held off from talks, saying BHP Billiton's offer undervalues the company. BHP Billiton in February made a hostile, all-equity bid, then valued at $147.4 billion, for Rio Tinto. At 3.4 of BHP shares for every Rio Tinto share, the value of the deal fluctuates with share prices.
It will need EU, U.S. and Australian regulatory approval for the bid.
The European Commission has started examining if the deal damages competition and on Friday set an initial deadline of July 4 to rule on the case. It can extend its inquiry before deciding on an in-depth investigation, which can last months. The EU rarely blocks deals, preferring instead to ask companies to eliminate antitrust worries by selling off units or making binding promises about the way they do business.
Source: AP
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