22 Februari 2008
European steelmakers blast massive increase in iron ore prices

BRUSSELS European steelmakers on Thursday blasted a massive hike in iron ore prices and called on EU regulators to block miner BHP Billiton Ltd's bid for rival Rio Tinto PLC that would shrink the number of major iron producers from three to two.

The world's largest iron ore miner, Brazil's Vale, on Monday struck a deal with six Asian steelmakers to raise iron ore prices by 65% amid booming global demand for the raw ingredient used to make steel.

Eurofer, the European Confederation of Iron and Steel Industries, said the agreement showed that too few iron ore producers have too much control over prices that will be passed on to customers worldwide.

"Imagine the pricing power which these suppliers will have when trade is dominated by just two companies," Eurofer's director general Gordon Moffat said, calling on EU antitrust regulators to "react firmly" when they are asked to clear Rio's takeover offer.
Rio Tinto has so far held off from takeover talks, demanding that BHP Billiton raise its offer valued at around US$147.4 bil. lion (100.35 billion).
Moffat said weak competition in the steel supply chain has already forced a price explosion.

"Ultimately, these extra costs will have to be passed on to the consumer. This will inevitably result in higher prices for steel in Europe and worldwide," he said.

ArcelorMittal SA, the world's largest steelmaker and a member of Eurofer, separately sajd iron ore contracts are forcing ft to hike prices again for flat carbon steel used to make cars, trains, ships and large machinesby up to 7% with immediate effect.

"Raw materials have reached an unprecedented cost level for our industry," the company said. Last month it announced a price hike of 12 to 15% from April. ArcelorMittal has sought to develop its own mining and energy projects to shield it from higher commodity prices.

F-urofer-which also represents Britain's Corus Group PLC and German steel makers ThyssenKrupp AG and Salzgitter AG said that Brazil's Companhia Vale do Rio Doce SA, Rio Tinto and BHP Billiton together control three quarters of globally traded iron ore.

Although BHP Billiton and Rio Tinto have a relatively small share in Europe, Moffat said two players would still be able to raise prices and hold back from expanding mines.

He also sees problems with coking coal used to fuel steel furnaces, saying Rio Tinto and a joint venture between BHP Billiton and Mitsubishi control nearly half of all exported hard coking coal.

Increasing demand from China's booming steel sector has driven significant hikes in iron ore prices in annual negotiations for the past six years, boosting miners' profits and sparking a drive to bring new production into the market. (AP)

 

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