China Economic Review
Charting China’s changing economic terrain · Since 1990
BHP, Rio back down
October 20, 2009
Plans by BHP Billiton and Rio Tinto to create a jointly owned $US116 billion iron ore colossus in Western Australia’s Pilbara are being recast to deal with competition concerns in Europe and fears in China — the world’s biggest iron ore consumer — that the combination would have too much pricing power. (That has been a serious bone of contention over the past few months.)It is believed the decision follows warnings by Australia’s ambassador to China, Geoff Raby. In Melbourne recently, he told both companies the proposed merger risked a serious backlash from their largest iron ore customer, which is China.
The companies acknowledged that the backdown was made with a view to customers’ concerns, saying the change ”will clarify the nature of the joint venture for customers and emphasise its focus on realising significant production and development synergies”.
WA Today suggests that there was originally an idea of creating three marketing pools (the separate marketing by BHP and Rio and the joint marketing pool) compared with two that exist now. And two is how it will remain.