China Stance

CISA for unified stand against Rio-BHP alliance

By Zhang Qi (China Daily)
Updated: 2009-12-18 07:57

A worker welding steel rods at a construction site in Taiyuan, Shanxi province. China's iron ore imports rose nearly 57 percent to 51 million tons in the first 11 months of this year.[China Daily]

The nation should make use of its anti-monopoly legislation to block the joint venture between Australian mining giants Rio Tinto and BHP Billiton, the China Iron and Steel Association (CISA), said yesterday.

All countries should jointly oppose the monopolistic joint venture between Rio and BHP, CISA said in a statement published in the China Metallurgical News.

The association said the planned $116 billion joint venture would harm competition and drive up global iron ore prices, and urged "customers across the whole world to oppose it as one".

Other major steel associations like the World Steel Association, the European steel industry lobby Eurofer and the Japanese steel industry association are also opposed to the merger, CISA said.

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The monopolistic nature of the global iron ore market is making it difficult for China to get a fair deal during annual contract price negotiations, the association said.

This year's iron ore price negotiations reached an impasse in June after CISA insisted on a 45 percent discount over last year's prices, after a 33 percent cut in benchmark iron ore prices had been reached by BHP, Rio and Vale with other Asian steel mills.

CISA said the proposed joint venture would make matters worse, despite promises from the two Australian miners that the new joint venture would cover only production and not sales.

The two mining giants signed a binding agreement earlier this month to consolidate their iron ore operations in Western Australia. The proposal is awaiting regulatory approvals.

"China will face a serious threat if the Rio and BHP joint venture gains ground as their resource monopoly will help them in controlling capacities and prices," Zhang Ye, vice-general manager of China National Minerals, a wholly owned subsidiary of metals trader China Minmetals, said recently.

China's iron ore imports rose nearly 57 percent to 51 million tons in the first 11 months of this year compared with the same period last year.