BHP-Rio scrap joint venture and ease steelmakers price fears

20 Oct 2010

Source  Procurement Leaders
As two of the largest iron ore suppliers in the world, BHP Billiton and Rio Tinto, confirmed the collapse of their 16-month effort to become the world's biggest iron ore exporter, global steelmakers breathed a sigh of relief. The joint venture, thought to be worth $116bn, would have combined iron ore mines and rail and port facilities in the Pilbara region of Western Australia. It promised at least $10bn in cost savings when it was first proposed in June 2009, reports the Financial Times. The declaration of its failure comes after objections from European regulatory bodies.

Steelmakers from around the world have been vocal in their disapproval of the proposed deal, fearing the pair would gain too much price control. Following the announcement of its collapse, Wolfgang Eder, chief executive of Voestalpine, Austria's biggest steel producer, and the chairman of Eurofer, the trade association for Europe's steelmakers, said he welcomed the news "especially in view of the already highly concentrated suppliers' market [governing production of iron ore]".But Mr Eder pointed out that it was important for the steel industry to find "alternative and additional sources" of iron ore to reduce the market dominance of the three companies - BHP, Rio and Vale - that control 70% of transcontinental shipments of the commodity.

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