BHP Billiton/Rio Tinto Iron Ore JV to Fail

Rio Tinto and BHP Billiton noted with disappointment on Friday the statement by German Federal Cartel Office with intention to prohibit the companies’ proposed iron ore production joint venture in Western Australia. The firms are scheduled to receive a formal notification from the FCO this week. The notification by the FCO in Germany would be the first formal one in the world while the authorities continue the investigation. The proposed joint venture’s possibility is getting narrower.

The firms explained they continue to believe that the JV is pro-competitive and will increase the supply of iron ore. They have taken no decisions about next step while they acknowledge the concerns expressed by some regulators and the obstacles.

The firms have to pass a screening by authorities of some countries and regions for establishment of the JV. The JV fails if the firms receive a formal negative notification from one of authorities. The JV is likely to fail while the authorities including in Japan and South Korea pointed problems.

World’s steel industries have been expressing strong opposition to the JV since the announcement of the plan in June 2009. There is a problem with the plan from the beginning, one executive of Japanese integrated steel maker said.