European Steel Industry Group Asks

May 30, 2008

May 30 (The Wall Street Journal) – The European steel industry’s main lobby group Friday asked European Commission antitrust regulators to block mining giant BHP Billiton Ltd.’s planned takeover of rival Rio Tinto PLC.

The combined companies would control roughly 40% of the market for iron ore transported by sea, allowing them to raise prices steelmakers pay for this key raw material, said Eurofer, the industry’s lobby group whose members include ArcelorMittal and ThyssenKrupp AG.

The commission earlier Friday said it has set a July 4 deadline to clear the deal or launch a four-month, in-depth investigation into possible antitrust issues.

“This is not in the interest of the European steel industry which has already had to pass on huge increases in raw material costs,” said Gordon Moffat Eurofer’s director general. “Such market dominance increases disproportionately the pricing power of companies concerned in iron ore and coking coal on top of the huge price increases seen over the last years.”

Rio Tinto and BHP Billiton are the world’s second- and third-largest iron ore producers after Companhia Vale do Rio Doce. The top three producers control roughly 75% of the world’s seaborne iron ore market.

Annual iron ore prices have increased by 71% during benchmark negotiations between the largest iron ore miners and steelmakers this year. And coking coal, another key input in steel making, has risen by 200% this year.

Rio Tinto in February rejected BHP Billiton’s all equity offer of 3.4 of its shares for every one Rio Tinto share, or about $178 billion at Wednesday’s closing price.

The two sides have worked to contrast their prospects for growth and profits, with BHP Billiton earlier this month saying it has outperformed Rio Tinto and has more immediate plans to boost its mining output.

BHP remains confident regulators won’t block the deal which they say can be completed by the fourth quarter of this year.

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